Archive for the ‘Sanctions’ Category


Sep

25

Burma Shaved Again


Posted by at 9:30 pm on September 25, 2007
Category: Sanctions

OldIn his address to the United Nations today, President Bush announced the administration’s intentions to impose new sanctions on Burma and its military regime:

The United States will tighten economic sanctions on the leaders of the regime and their financial backers. We will impose an expanded visa ban on those responsible for the most egregious violations of human rights, as well as their family members.

Aside from telling additional and as yet unnamed Burmese officials and their families that a trip to Disneyland won’t be in the picture for them any time soon, the President’s statement was not altogether clear about the precise sanctions that would be imposed.

Tom Casey, a State Department spokesperson, seemed to be caught up short in today’s daily press briefing by the State Department when reporters pressed for more details on the proposed new sanctions:

To the extent that we have specific names to add or new measures to announce, we’ll let you know.

Translation: “I have no earthly idea.” Elsewhere, Casey seemed to suggest that the list of individuals that would be subject to blocking orders might be expanded.

So what are the possibilities here for tightening the current economic sanctions on Burma. To be sure, as noted, the list of government officials subject to travel bans and subject to blocking orders could be expanded and that seems to be likely to be at least the minimum that will occur. But since the current sanctions aren’t comprehensive, there are other possibilities.

One possibility would be expanding export sanctions. The current sanctions only forbid exports of financial services to Burma. Accordingly, that export ban could be expanded to cover all goods and service subject only to the limits of the Berman amendment, 50 U.S.C. § 1702(b)(3), and the Trade Sanctions Reform Act of 2000 (TSRA). The Berman Amendment prohibits export controls on “informational materials” and TSRA forbids a unilateral sanction against a foreign country covering agricultural products, medicine or medical devices without express Congressional approval.

Another possibility includes prohibition in dealing in Burmese-origin goods and services. That would prohibit dealing in such goods and services even though they had not been imported into, or exported from, the United States. A similar provision is included in the Iranian Transaction Regulations.

If I look into my somewhat cloudy crystal ball, my guess is that the White House will simply expand the lists of Burmese officials subject to blocking and visa bans. But if the White House gets serious about the matter, we could well see an expansion of export bans and a prohibition in dealings in Burmese-origin goods and services.

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Copyright © 2007 Clif Burns. All Rights Reserved.
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Aug

17

U.S. Prepares to Designate Eritrea as State Sponsor of Terrorism


Posted by at 2:27 pm on August 17, 2007
Category: Sanctions

Eritrean StampDuring a briefing held today Assistant Secretary of State for African Affairs Jindayi Frazer announced that the United States is preparing to designate Eritrea as a “state sponsor of terrorism.” Such a designation would be made under the provisions of 50 U.S.C. App. 2405(j), which requires a finding that a country “has repeatedly provided support for acts of international terrorism.”

The U.S. intends to base its argument for designation of Eritrea as a state sponsor of terrorism on a July 18 report of the United Nations that found that “huge quantities of arms” have been provided Al-Qaeda linked groups in Somalia “by and through Eritrea.” These arms “include an unknown number of surface-to-air missiles, suicide belts, and explosives with timers and detonators.”

If designated, Eritrea would join the list of state sponsors of terrorism that currently is comprised by Cuba, Iran, North Korea, Sudan and Syria. Designation would automatically result in an arms embargo against Eritrea pursuant to section 40 of the Arms Export Control Act, 22 U.S.C. § 2780. It could also serve as a justification of a ban on imports from, and exports to, Eritrea.

Imposition of an arms embargo and/or comprehensive sanctions, including bans on imports and exports, would probably have minimal effect on U.S. exporters — or on Eritrea, for that matter. The Section 655 report for 2006 shows no licenses granted for shipments of arms to Eritrea. Other trade between Eritrea and the United States is small, which is not surprising given that Eritrea’s economy is overwhelmingly based on subsistence agriculture. Exports from the United States to Eritrea in 2006 were valued at $8,848,000. Imports from Eritrea to the United States in 2006 were even less and were valued at $858,000.

One area in which sanctions might be effective would be in cash remittances. The State Department estimates that currently 32% of the GDP of Eritrea is provided by overseas workers remitting cash back to their families and relatives in Eritrea. And a large number of Eritreans live in the United States. So, if Eritrea is designated and sanctions are imposed, my guess is that we will see prohibitions on cash remittances to Eritrea.

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Copyright © 2007 Clif Burns. All Rights Reserved.
(No republication, syndication or use permitted without my consent.)

Jul

23

If You Have an Export Law Question, Don’t Ask the Wall Street Journal


Posted by at 8:29 pm on July 23, 2007
Category: BISSanctions

DeniedAn editorial in Friday’s Wall Street Journal was critical of the United Nations Development Program (“UNDP”) for several supposedly illegal exports. The criticism seems to be largely based on the questionable claim that the UNDP was required to obtain export licenses from the Bureau of Industry and Security for certain items exported by UNDP from foreign countries to North Korea, including a spectrometer, some GPS equipment and some computer equipment. Sadly, the author of the editorial, Melanie Kirkpatrick, doesn’t appear to have consulted with anyone who actually knows anything about export law.

Ms. Kirkpatrick premises her analysis on a export license application by UNDP for GPS mapping software which was denied on September 16, 1999. She notes that the software was EAR99. Astute readers will recall that up until September 17, 1999, U.S. sanctions prohibited the export of EAR99 items to North Korea. Thereafter, EAR99 items were freely exportable to North Korea (although on January 26, 2007, new license requirements and prohibitions on exporting certain luxury items such as cognac and iPods to North Korea were put in place). Hence, the need then for a license application that would not be required now.

Even so, Ms. Kirkpatrick seems to think that such a license would still be required:

Yet seven years later, the UNDP procured and transferred sensitive technology to the same, unsafeguarded project — this time without bothering to apply for a license. And while there’s no evidence the UNDP went ahead and purchased the software for which it had been denied a license, that possibility must be considered, since GPS equipment is useless in such a project without mapping software.

If it’s EAR99 and was shipped before anuary 26, 2007, no license would have been required, meaning that UNDP could have freely exported the software to North Korea.

Nor is it clear that a license was required for the other items at issue. The commercial GPS system would be classified as ECCN 7A994 and would require a license for export to North Korea. Similarly, the computer equipment may well be ECCN 4A994, which would require a license for North Korea. We can’t tell from Ms. Kirkpatrick’s description what the ECCN would be for the spectrometer, but let’s also assume, for the sake of argument, that it wasn’t EAR99

Even so, the EAR wouldn’t require licenses for the export even of these items to North Korea unless exported from the United States, or unless exported by a U.S. person (which UNDP is not), or unless the item has U.S. content. And it’s not clear that any of these conditions were met. According to Ms. Kilpatrick:

Mr. Melkert says in the annex that the UNDP is investigating “whether the vendors [in the Netherlands and Singapore] were required to obtain export permits for these items”–which sure sounds like an effort to shift responsibility.

It may sound to the Wall Street Journal like an “effort to shift responsibility” but to anyone familiar with export law it sounds like a claim that the exports may not have been subject to U.S. law.

There may well be a number of good policy reasons that these items shouldn’t be in North Korea, but saying that the export of these items violated U.S. laws isn’t one of those reasons.

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Copyright © 2007 Clif Burns. All Rights Reserved.
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Jul

16

Myanmar Obtains Military Helicopters Despite Arms Embargo


Posted by at 3:43 pm on July 16, 2007
Category: Arms ExportSanctions

Dhruv Advanced Light HelicopterAmnesty International, according to a letter it sent last Friday to the President of the Council of Ministers of the E.U., has evidence that India intends to transfer two military helicopters to the Myanmar military. The Dhruv Advanced Light Helicopters in question contain component parts from E.U. defense suppliers. As a result Amnesty International is asking E.U. member states to withdraw existing licenses and deny future license for any exports to India that could be used for the Dhruv helicopter. Amnesty is also asking the E.U. to impose upon future exports a strict and enforceable condition that items could not be re-exported to countries subject to arms embargoes.

The Dhruv helicopter also incorporates U.S. parts. The active vibration control system is made by Lord Corporation in North Carolina. U.S. companies supplying components to India that could be used for the Dhruv should expect increased scrutiny if the delivery to Myanmar takes place.

Although incorporating a number of advanced features, the Dhruv has been plagued by some controversy. In February of this year a Dhruv crashed, killing one pilot and injuring the other, during practice maneuvers for an air show. A 2004 crash had been blamed on defective tail rotor design, which was claimed to have been fixed. The February crash calls that into question. However, the Myanmar regime can’t afford to be picky and will no doubt accept delivery of the Dhruv whether or not the tail rotor has been fixed.

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Copyright © 2007 Clif Burns. All Rights Reserved.
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Jul

2

SEC Is Making A List, Not Checking It Twice


Posted by at 8:43 pm on July 2, 2007
Category: SanctionsSEC

SEC SealA new link has appeared on the home page of the Securities and Exchange Commission’s website. Under “Investor Information” there is a link called “State Sponsors of Terrorism” Hmmm, you wonder, the SEC now thinks that investors need to know which countries are state sponsors of terrorism? Perhaps, because when you click the link, there’s a list itemizing Cuba, Iran, North Korea, Sudan and Syria.

But wait, there’s more. Each country on the list is linked to a list of companies that mentioned that particular country in its 2006 annual report. This list is clearly an outgrowth of the SEC’s Office of Global Security Risk, on which we’ve reported here before and which is tasked with reviewing securities filings of publicly-traded companies to determine whether, among other things, companies should disclose dealings with sanctioned countries.

Being on that list is probably not a good thing. So you might think that the SEC might exercise some discretion about who belongs on the list and who does not. But you would be wrong. Take for example, candy and soft drink giant Cadbury Schweppes, which is on the Syria list. But if you click the link on that page you will discover that Cadbury sold its operations in Syria. Yes, it’s on the list because the annual report mentioned Syria, but only in the context that it divested its operations in Syria. If the purpose of the list is to disclose to investors companies that are running a risk by having operations in sanctioned countries, that is hardly served by listing companies that have divested their operations in those countries.

Needless to say, the list is starting to draw fire from business interests. The Institute of International Banks, for example, charged that the blacklist could discourage banks from listing on U.S. securities exchanges, even though that might arguably be the goal of such a list.

(FULL DISCLOSURE: If it’s hot over the July 4th holiday, a certain Cadbury Schweppes product will, at my house, be liberally mixed with gin and a squeeze of fresh lime, so we may not be completely impartial in our reporting on Cadbury Schweppes.)

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Copyright © 2007 Clif Burns. All Rights Reserved.
(No republication, syndication or use permitted without my consent.)