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Archive for November, 2009

Nov

17

Export Nickel, Pay 14 Million Nickels

Posted by Clif Burns at 10:33 pm on November 17, 2009

K25 Building at the East Tennessee Technology Park Novamet Specialty Products Corporation recently agreed to pay $700,000 to the Bureau of Industry and Security (“BIS”) for 15 unlicensed shipments of nickel powder worth about $80,000. According to the charging documents, the powder was classified as ECCN 1C240.a. It does not appear from the charging documents that the violation was voluntarily disclosed by Novamet to the United States.

You may wonder why such a large fine for nickel powder. Well there is a partial answer to that, and the hint to the answer is the picture of the Oak Ridge gaseous diffusion uranium enrichment facility that illustrates this post. Gaseous diffusion enrichment requires a barrier that is used to separate isotopes of uranium, the goal being an output of fissionable uranium such as U-235. Apparently sintered nickel powder serves this purpose well. Sintered powder is powder that has been formed into a mass by high temperature and pressure alone without melting the powder. After this process, nickel creates a solid porous structure that permits the right isotopes to pass through and the others to stay behind, although it requires a multi-step cascading procedure. Sintered nickel powder was used as such a barrier in the gaseous diffusion plant at Oak Ridge.

Barrier technologies are, naturally, classified. But the description of ECCN 1C240.a probably gives a potential nuclear proliferator a good head start in developing a sintered nickel powder barrier. To be controlled under that ECCN, the nickel powder must be 99.0% pure and must have a mean particle size of less than 10 micrometers. I didn’t check each of the Novamet nickel powder exports alleged by BIS but five of them involved Novamet’s 4SP-10 powder, which judging from this specification sheet falls well within the parameters of ECCN 1C240.a.

That being said, and with requisite acknowledgment that this product could be used in uranium enrichment, there is certainly a foreign availability issue to consider here. The U.S. doesn’t mine or produce significant quantities of nickel. Russia is the largest producer, followed by Canada, Australia, and Indonesia. And nickel powder isn’t controlled under the Wassenaar Arrangement meaning that these countries can freely export nickel powder meeting the specifications described in ECCN 1C240.a. So, a $700,000 fine against Novamet seems far in excess of any injury that the exports might have caused.

UPDATE: Ed Fox, from DOE’s NNSA, points out in the comments that nickel powder is controlled by the Nuclear Suppliers Group. Indeed, it is listed on that group’s Guidelines for Transfers of Nuclear-Related Dual-Use Equipment, Materials, Software, and Related Technology under Category 2.C.16.a. That would prevent exports by Russia, Canada and Australia of nickel powder to certain countries. Singapore, another major producer of nickel, however, is not a member of the Nuclear Suppliers Group, although I can’t determine whether it has manufacturers who export nickel powder.

[P.S. The brief I mentioned earlier as my excuse for not posting more has been filed, so I should be on a more regular posting schedule.]

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Nov

12

Gone Briefing

Posted by Clif Burns at 8:15 am on November 12, 2009

Category: DDTC

Busy I’ve received some emails from irate subscribers demanding their money back (to steal a joke from Jim Bartlett) due to the paucity of postings lately. Kinder, gentler readers have expressed concern as to whether I have been kidnapped. To the first group, I say, your refund check is in the mail. To the second, I say, I have a brief due this upcoming Monday on an export issue before the U.S. Court of Appeals for the D.C. Circuit, and it’s been taking up mountains of time. Posting should be back to normal next week.

In the meantime, for your enjoyment, I offer up two particularly amusing instances, sent to me by readers, of companies that have paid their registration fees to DDTC and are bound and determined to get extra mileage out of their fees with press releases providing novel theories about the benefits of manufacturer registration under Part 122 of the ITAR.

Contestant No. 1 goes for the gold by refusing to call it a registration — no, no, it’s now a “certification.” It demonstrates that DDTC has “certified” that the company “has the knowledge and understanding to fully comply with the Arms Export Control Act (AECA).” I’ll bet you didn’t know there was a test involved, did you? What, you didn’t take one before you sent in your registration form? Uh oh. And for more fun, take a look at the definition of “U.S. person” at the bottom of Contestant No. 1’s press release.

Contestant No. 2 is a company that I at first thought, incorrectly, was the company that froze Ted Williams for future reanimation in 2094. (Even that wouldn’t help the Red Sox at this point.) This company takes a standard approach and merely talks about how it has received registration. Perhaps this company didn’t want such a splashy press release because it looks like it has been providing “specialty cryogenic processing services for sensitive components used in military, aerospace and defense applications” for some time but only became registered just last month. I suppose they are trying to minimize the risk of a directed disclosure.

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Nov

5

Ex-Treasury Advisor Claims U.S. Jurisdiction over Entire Planet

Posted by Clif Burns at 2:27 pm on November 5, 2009

Category: Iran Sanctions

ABOVE: Avi Jorisch

Avi Jorisch, who used to be a policy advisor at the Treasury Department’s office of Terrorism and Financial Intelligence, wrote an Op-Ed in the Wall Street Journal titled “How Iran Skirts Sanctions: Could a U.N. agency be helping Tehran to launder money?” Jorisch’s article reaches some rather, er, surprising, ahem, conclusions about the scope of U.S. economic sanctions against Iran.

Mr. Jorisch’s article details the supposedly nefarious dealings of the Asian Clearing Union, which he erroneously refers to as a “United Nations office headquartered in Tehran.” The Asian Clearing Union, while formed during discussions sponsored by the United Nations Economic and Social Commission for Asia and the Pacific (ESCAP) in 1974, is an independent multilateral organization.

Like all currency clearing unions, the Asian Currency Union allows participating countries to engage in trade with each other without converting local currency to a hard currency (such as euros or dollars) for each transaction. Rather member countries must only obtain hard currencies to clear any net deficit in that currency in their union accounts at the end of the settlement period. Even then currency swap arrangements among member countries may delay or eliminate the need for hard currency conversion at the end of the settlement period. The end goal of the Asian Currency Union, like other such clearing unions, is, obviously, to facilitate trade between the member countries, which, at this time, are Bangladesh, Bhutan, India, Maldives, Burma, Nepal, Pakistan and Sri Lanka.

Jorisch refers to the Asian Clearing Union as a “classic money laundering instrument â€¦ [used] to circumvent the U.S. sanctions program. But let’s take a look at a sample transaction that has Mr. Jorisch’s knickers in a knot:

Imagine the Iranian regime wants to buy machinery from an Indian company that insists on getting paid in dollars.

Whoa, Ari, hold your horses there. The Iranian Transactions Regulations only cover exportation by United States persons or re-exportation by foreign persons of U.S-origin goods. If the Indian seller here is exporting Indian made goods to Iran, the U.S. sanctions have not been violated. And even if a U.S. correspondent bank is involved, U.S. law only prohibits the bank’s participation, not the transaction between India and Iran. Finally, if the Asian Clearing Union means that the transaction can be cleared in dollars without a U.S. bank ever being involved, then, I think that’s not what we call skirting the Iran Sanctions but rather what should be called a legally-structured transaction. Simply put, the United States doesn’t rule the world, and it doesn’t have jurisdiction to enforce U.S. sanctions against Iran against everyone on the planet.

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Nov

2

Let Them Write Letters

Posted by Clif Burns at 8:34 pm on November 2, 2009

Category: Economic Sanctions • OFAC

Twitter Keeps Iran Afloat Last week several readers brought to my attention a Bloomberg story that announced in its headline “U.S. Wants Microsoft to End Message Ban in Iran, Cuba.” This created a bit of a hubbub at the world headquarters of Export Law Blog, since this blog has been advocating for some time that the information exception be read to cover instant messaging, twittering, and the like. Alas, as we learned at a tender age, you can’t believe everything you read in the newspapers. (You can, of course, believe everything you read in blogs.)

The Bloomberg story referenced a letter that OFAC sent last month to the Center for Democracy in the Americas, a group that, like Export Law Blog, has been a persistent critic of the Cuba sanctions. But when you read the letter, it’s quite clear that the letter doesn’t exactly say that the U.S. wants to end the application of sanctions to instant messaging services:

We assure you that the discontinuation of instant messaging services [by Microsoft to users in Cuba, Syria, Iran, Sudan and North Korea] was not directed by OFAC or, to our knowledge, any other Federal agency. Ensuring the flow and access to information available through the Internet and similar public sources is consistent with the policy interests of the United States Government.

OFAC is participating in an interagency effort to review any discontinuation of certain instant messaging services to sanctioned countries, with the goal of insuring that such services will be available to persons in sanctioned countries to the extent permitted by current U.S. law. [emphasis added]

The last clause is the catch here. OFAC has typically interpreted the information exception very narrowly, and there is no indication that OFAC has changed its view of what’s “permitted by current U.S. law.”

Instant messaging services require the download of software, and OFAC takes the position that software isn’t information covered by the information exception. Twitter creates a miniblog page with a unique URI for each user, which would, under OFAC’s narrow view of “information,” be considered provision of a service in violation of the sanctions regulations.

OFAC’s antiquated view of information, apparently formulated sometime between the invention of the printing press and Columbus’s discovery of the Americas, comprises only things written in ink on paper. Throw a few electrons into the mix and all bets are off.

So I wouldn’t take this OFAC letter to the bank if I were you. At least not yet.

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