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Archive for December, 2007

Dec

22

How the OFAC Stole Christmas

Posted by Clif Burns at 1:02 pm on December 22, 2007

A spokesman for the Treasury Department’s Office of Foreign Assets Control (“OFAC”) told Export Law Blog this morning that discussions between OFAC and the North Pole over Santa Claus’s Christmas Eve itinerary had broken down and were not expected to be resumed before Santa’s scheduled departure on December 24 at 10 pm EST.

The dispute arose from a dilemma that the U.S. sanctions against Cuba posed for Santa’s planned delivery of toys to children in Cuba. If Santa delivers toys for U.S. children first, there will be toys destined for Cuba in the sleigh in violation of 31 C.F.R. Â§ 515.207(b). That rule prohibits Santa’s sleigh from entering the United States with “goods in which Cuba or a Cuban national has an interest.” On the other hand, if Santa delivers the toys to Cuban children first, then 31 C.F.R. Â§ 515.207(a) prohibits the sleigh from entering the United States and “unloading freight for a period of 180 days from the date the vessel departed from a port or place in Cuba.”

A press release from the North Pole announced that the OFAC rules left Santa no choice but to bypass the children of the United States this Christmas. A spokesman from OFAC warned that if Santa attempted to overfly the United States, his sleigh would be forced to land and his cargo seized. He continued:

We know that the outcome is harsh, but we cannot allow Fidel Castro’s regime to continue to be propped up by Santa’s annual delivery of valuable Christmas toys to Cuban children.

Congressional leaders had left for the holiday recess and could not be contacted for comment.

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Dec

20

Toothbrushes and Diamonds

Posted by Clif Burns at 9:39 pm on December 20, 2007

Norman Augustine
Chair, Deemed Export
Advisory Committee

The Deemed Export Advisory Committee released today its report to BIS on BIS’s deemed export rules. The deemed export rules, among other things, require licenses prior to release of technology on a dual-use item to a national of a country if an a license would be required for the export of the particular dual-use item to the country in question.

The report is lengthy and I haven’t had time to review it fully, but an idea of the report’s contents can be gleaned from its epigraph:

If you guard your toothbrushes and diamonds with equal zeal, youâ€™ll probably lose fewer toothbrushes and more diamonds.

— McGeorge Bundy

The diamonds apparently represent dual-use items and the toothbrushes represent the technical data regarding those items. So, not surprisingly, the report recommends loosening the deemed export rules in certain respects. Principally, the report recommends the creation of a “Trusted Entity” category. Trusted Entities would be companies and universities that meet certain criteria and that would therefore not be required to obtain individual export licenses to transfer dual use technologies to foreign nationals. Such foreign nationals would be required, however, to sign non-disclosure agreements.

But in another respect, the report recommends tightening deemed export rules when it wades into the tricky territory of permanent residents, dual nationals and individuals who have resided in multiple countries. Under current rules, the BIS looks at an individual’s current citizenship and/or legal permanent residence. The report recommends expanding the inquiry:

[We recommend] expanding the determination of the national affiliation of potential licensees to include consideration of country of birth, prior countries of residence, and current citizenship, as well as the character of a personâ€™s prior and present activities, to provide a more comprehensive assessment of probable loyalties.

The report’s explication of this recommendation contains this example:

It would seem that inadequate distinction is made between an individual who, say, was born and raised in Iran but only recently became a citizen of the UK and an individual who was born in Iran but moved to the UK and became a citizen of the latter nation shortly after birth. Additionally, it would seem to be important to consider where that individual resided during his or her entire lifetime – not just where he or she was born or where his or her current citizenship has been granted. It is noteworthy that the current BIS interpretation is that the Deemed Export rule does not apply to persons lawfully admitted for permanent residence (i.e., green card holders), wherever their prior residences may have been.

(emphasis in original)

This analysis is sensible, but it also carefully finesses a significant problem. It is not clear whether the report is recommending that a foreign national admitted to lawful permanent residence in the U.S. should continue to be treated as a U.S. citizen for purposes of deemed exports or whether the rules should be revised to treat a U.S. permanent resident like any other foreign national and potentially subject to disqualification from deemed exports based on country of birth or country of former residence.

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Dec

19

DDTC Amends Rules on Transfers of Technical Data

Posted by Clif Burns at 11:50 pm on December 19, 2007

Category: DDTC

Copy of the ITAR The State Department’s Directorate of Defense Trade Controls (“DDTC”) released today a final rule making it easier to transfer technical data under a technical assistance agreement (“TAA”) to third-country nationals, i.e., nationals of countries other than the country specifically authorized under a TAA. Under current procedures, if a U.S. company enters into a TAA permitting the transfer of technical data on a defense article to a company in France, that technical data can’t be transferred to anyone other than a French national unless the approved TAA provides for such transfer and the non-French national signs a nondisclosure agreement.

Under the new rules, technical data can be transferred to a third-country national without specific authorization and a nondisclosure agreement if four conditions are met. First, the third-country national must be a national “exclusively” of a NATO country, a European Union country, Australia, Japan, New Zealand, or Switzerland. Second, the third-country national’s employer must have either signed the TAA or a nondisclosure agreement. Third, the transfer must take place within the United States or the countries listed in the first condition. Finally, the transmittal letter for the TAA must explicitly state that permission is requested to make transfers to third-country nationals under these new provisions.

In its discussion of the new rules, DDTC restates its controversial position that a person may be a third-country national not only because of dual citizenship but also because of country of birth:

In addition to citizenship, DDTC considers country of birth a factor in determining nationality.

How the DDTC applies these factors is not clear from this statement. In theory, a French citizen born of French parents temporarily in Iran might be deemed Iranian. Or an individual born in Iran of Iranian parents that became a French citizen might still be considered an Iranian even if that individual has not retained dual citizenship.

Admittedly application of the rule in the first example is more controversial than in the second example. Still even the second example involves a double standard that rankles our allies. If an Iranian is made a permanent resident in the United States, he or she is treated the same as a U.S. citizen for deemed export purposes, whereas an Iranian naturalized by France is still treated as an Iranian.

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Dec

18

Belarus Calls U.S. Sanctions Illegal

Posted by Clif Burns at 9:18 pm on December 18, 2007

Category: General

Alexander Lukashenko

Sometimes even somebody as distasteful Belarus’s dictator Alexander Lukashenko may have a point. Reacting to news that the U.S. may be considering further sanctions against Belarus, Belarus’s ambassador to the United States, Mikhail Khvostov, held a press conference to denounce the U.S. sanctions as illegal. The further sanctions against Belarus will likely target other state-owned companies in the same fashion that sanctions were imposed earlier this year on Belarus’s state-controlled oil-processing and chemicals company, Belneftekhim.

Khvostov pointed to the Memorandum on Security Assurances signed by the United States and Belarus in 1994. The U.S. entered into this Memorandum in exchange for Belarus agreeing to accede to the Nuclear Non-Proliferation Treaty. The relevant provision is this:

The United States of America, the Russian Federation, and the United Kingdom of Great Britain and Northern Ireland, reaffirm their commitment to [Belarus], in accordance with the principles of the CSCE Final Act, to refrain from economic coercion designed to subordinate to their own interest the exercise by the Republic of Belarus of the rights inherent in its sovereignty and thus to secure advantages of any kind.

According to Khvostov, the imposition of economic sanctions on Belarus notwithstanding this provision “shows that at any time the Bush administration can roll back the U.S. security assurances given to a legally binding instrument.” Not surprisingly, David Kramer, a State Department spokesman, countered that “We consider our actions to be wholly consistent with our political commitments and our obligations.”

It’s hard, however, to square the sanctions with the Memorandum unless one accepts one of two possible, but untenable, arguments. First, it might be argued that the sanctions are aimed at Lukashenko, members of his regime, and one state-owned company and not at Belarus itself. But the Memorandum prevents economic coercion broadly without making an exception for economic coercion targeting regime members and state-owned companies rather than the entire country. Second, it might be argued that the anti-democratic activities of Lukashenko which serve as the basis of the sanctions are not rights “inherent in sovereignty,” but this argument seems strained as well since sovereignty means, in the broadest sense, the right for a country to do what it wants, including things that are not necessarily democratic.

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Dec

14

Surprise, Surprise, Surprise!

Posted by Clif Burns at 4:39 pm on December 14, 2007

Category: Iran Sanctions

We reported earlier this week that Iran had announced that it had built a quasi-supercomputer using 213 AMD chips despite U.S. sanctions which would forbid the export of those chips to Iran. Where do you think the chips came from?

Wait, wait, don’t tell me. Let’s first look at a detail of a picture from the Iranian High Performance Computing Research Center (“IHPCRC”) website, showing the computer being built. (This picture has been mysteriously “disappeared” from the IHPCRC site, but was copied first by Softpedia before it vanished).

Let’s zoom in now on one of those boxes behind him.

Well, well, well. That box comes from Thacker FZE, whose website has also mysteriously disappeared, but still appears in the Google cache. Thacker is a distributor of AMD chips. In the UAE. Oh, and look, that would be UAE written right under Thacker’s name.

Who would have thought that the AMD chips came from the UAE?

According to an article in Computerworld:

A spokesman for Thacker … said they have no customers in Iran and noted that products can be imported into that country by many different means, including individual Iranians buying “one or two pieces” of technology in locations such as the UAE and then bringing them across the border.

I’ve been wondering where Baghdad Bob went. Apparently he’s now a spokesman for Thacker in the U.A.E.

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