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Archive for October, 2009

Oct

20

Menos Telefonos Para Mas Personas

Posted by Clif Burns at 7:56 pm on October 20, 2009

mas_telefonos

Recent rule changes adopted in April and designed to remove certain sanctions imposed on telecommunications to Cuba had been met with complete silence by the Cuban government. Until last weekend, that is.

According to a story in GlobalPost.com, the director of international operations for the Cuban telephone monopoly, rebuffed the White House’s overtures with a “thanks, but no thanks.” Well, more accurately, leave out the “thanks.” The response was pretty much limited to “no.”

[D]uring an official government newscast Saturday, ETECSA international operations director Vivian Iglesias said there were two major obstacles to such a partnership: some $160 million in frozen funds that the U.S. government seized from ETECSA in 2000, and trade restrictions imposed by the 1992 Cuban Democracy Act, which forces Cuba to pay U.S. companies through third countries, incurring additional transaction fees.

â€œIt may seem like the Obama administration has expanded communication possibilities,â€ said Iglesias. â€œBut we know that unless restrictions like the (Cuban Democracy Act) and others that have been tightened since 1992 donâ€™t change, there canâ€™t be any normal communication.â€

This appears to represent significant backtracking by Cuba on how to deal with the blocked funds. The blocked funds, which date back to 1966, represent funds owed by U.S. telecom carriers to Cuba for local carriage of calls originating in the United States. After the U.S. permitted payment of these local carriage charges to Cuba on a going-forward, but not retroactive, basis, Cuba attempted to recover the blocked funds with a 10 percent tax on calls to Cuba from the United States, even when routed through a foreign telecom company. Until the April regulations, U.S. authorities had refused to permit payment of this 10 percent tax, which ultimately led to Cuba’s suspension of direct telephone service between the United States and Cuba.

Now instead of seeking to recoup the funds incrementally through the tax, Cuba appears to want the U.S. to unblock the funds immediately. The problem here is that some of the blocked funds were released to pay judgments against the Cuban government obtained by the U.S. survivors of a Cessna flown by an American anti-Castro group into Cuban airspace and shot down by Cuba in 1996. Now that payment of the recoupment tax is permitted, the only reason that Cuba has moved the goal posts would appear to be that it’s not particularly interested in permitting direct calls from the U.S. to Cuba in any event.

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Oct

19

Unguided Missile Attacks

Posted by Clif Burns at 3:04 pm on October 19, 2009

Bill Gertz's Scream A headline in last Thursday’s Washington Times portentously warned: “EXCLUSIVE: Obama loosens missile technology controls to China.” The sub-head was “Fulfill Your Final Wishes. Nuclear Apocalypse Expected Tomorrow!!” Well, not really, that wasn’t the actual subhead, but it could have been, given the stern warnings in the article about the supposed dangers of the White House’s actions.

The reason for the doomsday tone was likely that the Washington Times reporter Bill Gertz wrote a story about something that he didn’t really know anything about. Indeed, he probably would have had a better chance of writing an accurate story if he had reported instead on, say, aspectual features of the verb and the relative position of the locatives in Mandarin Chinese.

Let’s roll the tape:

President Obama recently shifted authority for approving sales to China of missile and space technology from the White House to the Commerce Department — a move critics say will loosen export controls and potentially benefit Chinese missile development.

About the only thing in that sentence that is true is the phrase “critics say,” the rest being sadly misinformed. Items on the Missile Technology Control Regime (“MTCR”) are, depending upon whether the MTCR item is on the United States Munitions List (“USML”) or the Commerce Control List (“CCL”), licensed either by the Department of State’s Directorate of Defense Trade Controls (“DDTC”) or the Department of Commerce’s Bureau of Industry and Security (“BIS”). Items on the USML are licensed by DDTC and are subject to the embargo in section 126.1 of the International Traffic in Arms Regulations (“ITAR”), meaning, of course, that none of these items will be approved for export to the PRC. Items on the CCL are licensed by BIS and those license are considered on a case-by-case basis by BIS. Nothing in the bemoaned action by the Obama administration changed any of that or shifted any licensing authority over MTCR items from State to Commerce

The action that the Washington Times is referring to is a Presidential Determination made on September 29 that delegated to the Commerce Department the President’s obligation to certify to Congress under section 1512 of the National Defense Authorization Act of 1999, 22 U.S.C. Â§ 2778 note, that exports to China of missile and space technology won’t be detrimental to the U.S. space industry or measurably improve the missile or space launch capabilities of the PRC. This is a certification that is made after DDTC or BIS has already approved the export, so the White House action here didn’t shift the authority to approve at all.

Nor did the White House’s action shift, as a practical matter, the obligation over section 1512 certifications from State to Commerce. Given the embargo on shipping USML items to China, the only MTCR items being exported now are items that have already received an export license from BIS. As a result, any section 1512 certifications made by the White House on those exports were undoubtedly made in consultation with the Secretary of Commerce and, no doubt, highly influenced by the findings by BIS and the Secretary of Commerce made in order to justify the export of the MTCR items to China. The White House delegation is really nothing more than a formal delegation of what already had been effectively delegated to Commerce prior to the September 29 Presidential Determination. Suggestions that this change is effective to handing over U.S. nuclear missile technology to Beijing are, simply put, crazy talk, more likely informed by the Washington Times‘s political agenda than by any actual understanding of export law.

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Oct

15

Agreement Guidelines Update Updated

Posted by Clif Burns at 7:37 pm on October 15, 2009

Category: DDTC

State Department Earlier this week, we reported on the new Agreement Guidelines posted last Friday by the Directorate of Defense Trade Controls (“DDTC”). The new Guidelines provided instructions for electronic filing of requests for approval of agreements to exchange technical data on military items with foreigners (“TAAs”) and agreements for the manufacture of military items overseas (“MLAs”).

One source of concern was the new format announced for filing amendments to these agreements. Although not stated clearly in the new guidelines, DDTC has advised us that the new format, although permissible now, will only become mandatory when electronic filing becomes mandatory in 2010. In the meantime, exporters can still file amendments in the old format — at least if they still have a hard copy of the earlier guidelines which described the old format since those guidelines have disappeared from DDTC’s website.

Another clarification was provided with respect to the requirement that conformed copies of the agreement be submitted with the amendment. DDTC, in describing those conformed copies, stated:

DDTC will only accept amendments that have been “conformed” or consolidated. In other words, all major amendments MUST be submitted as entire agreements with proposed changes identified by bolded text (not “track changes”). Applications that simply describe which sections or articles to the agreement are being modified shall be Returned Without Action

We wondered how all changes, both insertions and deletions, could be bolded without unnecessary confusion. DDTC told us today that additions should be bolded in the conformed copy of the agreement and that deleted sections should simply be deleted, with each deletion being described in the part of the amendment that summarizes the changes accomplished by the amendment. That’s not what the new guidelines say, but it is certainly easier and clearer than bolding all changes in the conformed copy.

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Oct

14

Think Positive

Posted by Clif Burns at 7:31 pm on October 14, 2009

Category: Anti-Boycott

Boycotting the Boycott Perhaps in order to remind everyone that it still exists, the the Bureau of Industry and Security’s Office of Anti-Boycott Compliance (“OAC”) issued a warning letter to CENTRIA, a manufacturer of building enclosure systems based in Moon Township, Pennsylvania. According to the letter, CENTRIA supplied to its freight forwarder a commercial invoice with the following language:

THE GOODS SHIPPED ARE NOT OF ISRAELI ORIGIN NOR DO THEY CONTAIN ANY ISRAELI MATERIALS. THEY ARE NOT DESIGNATED TO VISIT ANY ISRAELI PORTS NOR ARE THEY EXPORTED FROM ISRAEL. THEY ARE OF USA ORIGIN.

The OAC said it was closing the matter with just a warning letter because CENTRIA had voluntarily disclosed the violation.

As usual, the OAC provided little commentary as to why this language was problematic and merely asserted simply that “Section 760.2(d) of the Regulations prohibits providing such information.” OAC’s bare bones explanation is certainly not the result of OAC being too busy to spend the time explaining its reasoning. Perhaps it’s an admission that the Anti-Boycott regulations, with their 101 pages of densely packed legalese and eleventy trillion or so hypothetical examples of what’s naughty and what’s nice, are simply too complex to explain and summarize in any meaningful sense in less than, well, a hundred or so pages.

The problem here is that the absence of such an explanation, even a brief one, might give the wrong impression to exporters. The letter could be read as saying that the regulations prohibit supplying the information that the goods are made in the U.S.A. The warning letter might have at least provided an explanation of the difference between a negative certificate of origin (mostly naughty) and a positive certificate of origin (mostly nice). A positive certificate of origin is generally acceptable unless the person supplying that certificate knows that it is being used to enforce a boycott as, for example, when the request for the positive certificate comes from an anti-boycott compliance office of an Arab League country.

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Oct

13

New Agreement Guidelines Posted by DDTC

Posted by Clif Burns at 7:42 pm on October 13, 2009

Category: DDTC

State Department On Friday the Directorate of Defense Trade Controls (“DDTC”) issued revised guidelines for submitting agreements such as Technical Assistance Agreements (“TAA”) and Manufacturing License Agreements (“MLA”). As most export geeks know, TAAs and MLAs, once submitted to and approved by DDTC, permit, respectively, the exchange of technical data on defense articles with foreigners and the manufacture of defense articles overseas.

Most of the changes in the revised guidelines relate to matters relating to the long-awaited electronic submission of TAAs and MLAs though DDTC’s electronic filing system. Electronic filing of agreements will become mandatory in 2010. After reviewing these new guidelines for electronic submission, my guess is that most exporters would be happy to wait more, a long time more, maybe a decade or so, in fact, for electronic filing of agreements.

What DDTC has managed to do is to make electronic filing even more complicated and difficult than paper filing. Not only must the exporter file everything that it had previously been submitting, including the tediously ornate transmittal letter, but also the exporter must now complete and file with all that a DSP-5 which, in this case, DDTC quaintly calls a “vehicle DSP-5.” Why on earth DDTC can’t simply let exporters upload pdf versions of the agreement documents (a filing procedure used successfully by, for example, almost every court in the country) is unclear. Instead, by adding an additional layer of paperwork, DDTC has just made the procedure more expensive and time-consuming as well as creating the opportunity for mistakes and returned agreements.

Not everything in the new guidelines relates to electronic filing. Some of the changes relate to paper filings before electronic filing becomes mandatory. For example, amendments must now contain a “conformed” copy of the agreement with the changes in bold typeface. The guidelines make clear that “tracked” changes (i.e. additions underlined and deletions stricken out) aren’t acceptable, so it is not entirely clear how DDTC wants agreement filers to indicate the difference between additions and deletions, nor why it is so adamant about not wanting “tracked” changes. Perhaps the computers at DDTC can’t render strikeout text.

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