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. § 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. § 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.

Looking at the title of today’s notice from the State Department’s Directorate of Defense Trade Controls (“DDTC”), which reads “Policy of Denial Regarding ITAR Regulated Activities of EP Investments, LLC (a/k/a Blackwater),” one might think it’s “Bye, Bye, Blackwater.” But the actual content of the notice isn’t quite so bad since it provides significant exceptions to this policy of denial, exceptions which seem designed to allow Blackwater’s contracts with the United States Government to proceed unimpeded as long as Blackwater files some additional paperwork for its new license applications.

In fact, the policy of denial doesn’t apply to applications that are in “direct support to the U.S. Government” and where certain conditions are met. Those conditions are the following:

Applications that are not in direct support of the U.S. government are subject to a policy of denial unless the license request “is based on overriding U.S. national security, foreign policy or law enforcement grounds or present other compelling reasons.” In cases found to meet that criteria, the ECC must submit the same certification letters, including the 30- and 60-day followups, as described above.

Finally, Blackwater isn’t allowed to use any ITAR exemptions from licensing, such as the spare parts exemption in section 123.16(b)(2). Instead, license applications must be filed for each exemption and those applications will be considered on a case-by-case basis.

Outside of requiring a bundle of additional paperwork for each Blackwater license, the biggest effect of the new policy is probably that Blackwater won’t be able to follow through on its proposed pirate-chasing gig.

According to an exclusive story in today’s Washington Times, the Validated End User Program implemented by the Department of Commerce’s Bureau of Industry and Security (“BIS”) may be terminated before the end of the Bush administration on January 20. Under that program, five companies in China were permitted to obtain from U.S exporters certain dual use items without export licenses that otherwise would have been required. As reported earlier on this blog, the program had come under criticism because two of the five validated end users had links to the Chinese military. The program had also come under fire because the Chinese government was not allowing U.S. investigators to have access to the facilities of the approved companies to verify that the exported items were not being diverted to the Chinese military.

An unidentified spokesman for the Commerce Department, who spoke to the Washington Times on condition of anonymity, said that the program could only be saved if the Chinese agreed to on-site inspections:

“This program will either be fixed or ended before Jan. 20,” the official said, adding that a decision will be made “in days, not weeks.”

China could avoid a suspension of the program by agreeing to U.S. demands for on-site inspections. The official said, however, that it does not appear likely that Beijing will make concessions before the Bush administration leaves office.

You have to wonder why BIS ever thought it would be able to engage in official inspections in foreign countries. Not surprisingly, most foreign countries are just a little touchy about the sovereignty issues raised by allowing foreign law enforcement officials to inspect facilities located on the foreign countries’ soil. Indeed, the Chinese had a history of interfering with efforts by the U.S., even before the Validated End User program was adopted, to determine whether items shipped under export licenses were used in the manner described in the export licenses.

UPDATE: BIS has issued a press release disputing the Washington Times article. The release states, among other things, that BIS has been able to conduct site-checks in China and is simply trying to formalize procedures for future site checks. It does concede that suspension of the program is a possibility if those procedures are not formalized.

[h/t to commenter jd]

Three naturalized U.S. citizens, Dan Tran Dang, Liem Duc Huynh, and George Ngoc Bui were recently indicted and charged with conspiracy to export 55 third generation military night vision goggles to Vietnam without a license. According to the indictment, the men purchased ITT AN/PVS-7 night vision goggles from Win-Tron Electronics, an electronics wholesaler principally specializing in marine electronics. The head straps and helmet mounts were removed and shipped to defendant Bui in Vietnam. The remaining parts of the night vision were then carried by Huynh and Dang in their luggage on trips to Vietnam.

The three men were caught in large measure because of Win-Tron Electronics and what appears to have been its careful attention to export compliance issues. According to a story in the Tulsa World, Win-Tron tipped off the authorities when it became suspicious of the purchases by the three men. The defendants claimed to have a business called Protective Security, and yet the address for Protective Security turned out to be a private residence. This apparently led Win-Tron to suspect that Protective Security had no use for a large volume of night vision goggles and suggested that the goggles might be instead destined for export, likely to the defendants’ country of origin.

Knowing your customer means knowing where your customer lives; and if a business has a residential address, this certainly should be considered a red flag.