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Archive for April, 2013

Apr

18

T-Platforms Placed on Entity List; SUNY No Longer Feels Sunny

Posted by Clif Burns at 8:11 pm on April 18, 2013

Source: T-Platform (Fair Use) Some tech writers have just discovered the Bureau of Industry and Securities’ Entity List and they are, well, perplexed. Arstechnica, Slashdot and HPC Wire all weighed in on the mysterious list, with all three expressing some surprise that U.S. companies could no longer supply components to T-Platforms, the Russian supercomputer manufacturer that BIS put on the Entity List back in March.

The BIS notice putting T-Platforms on the Entity List cited two rationales. First, the company had received shipments of a number of export-controlled items that had been shipped without the required licenses. Second, the notice stated that there was “reason to believe” that T-Platform was involved with the Russian military’s research on nuclear weapons. As a result, BIS stated that all exports of items subject to the EAR would require licenses and that the licensing policy would be a presumption of denial.

By focusing on the impact of the designation on exports of components and hardware to T-Platforms, the articles all missed a more interesting issue. Last year, T-Platforms delivered a supercomputer to the State University of New York at Stony Brook. My educated guess is the SUNY paid a small fortune and expected and received an agreement from T-Platforms that it would provide maintenance and service as needed for the supercomputer.

Uh-oh. To say the least. Somebody at SUNY right now is probably asking who on earth had the bright idea to buy this thing from Russia, because I’m sure that someone has realized by now that most requests for service by T-Platforms of this leviathan would inevitably require that SUNY transfer EAR99 technology to T-Platforms. Â Such a transfer would occur to the extent that the request would transfer to T-Platforms non-public information on the development, production or use of the computers.

How long before we see SUNY’s new supercomputer on eBay for $19.99 OBO?

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Apr

17

An Egregious “Non-Egregious” Sanctions Violation?

Posted by George Murphy at 11:36 pm on April 17, 2013

Source: San Corporation (Fair Use) OFAC announced on Friday a settlement with California-based SAN Corporation (“SAN”) for anÂ alleged violation of the Iranian Transactions Regulations that occurred in September of 2007. Â OFAC alleged that SAN sold nutritional supplements to an entity in Kuwait with knowledge that their end use was to be in Iran. Â SAN agreed to pay $22,500 to settle liability for the alleged violation. Â OFAC reported that the base penalty amount for the alleged violation was $25,000.

OFAC determined that the alleged violation was non-egregious and it provided several conditions to support that finding: (1)Â its allegation involved one instance, (2) SAN had no history of prior OFAC violations and (3) the goods at issue, in OFAC’s words, “appear to have been eligible for a license” under TSRA.

What leaves us bewildered is the parade of horribles that OFAC also recites: (1) SAN did not voluntarily disclose the transaction to OFAC, (2) SAN acted with “reckless disregard” for sanctions law by selling to an entity in Kuwait with knowledge that end use was in Iran and having been informed by the Iranian end-user that intended shipment to Iran required an OFAC license and (3) SAN did not fully cooperate with OFAC by providing “incomplete and/or inaccurate statements” to OFAC.

Whatever all the reasons were behind OFAC’s agreeing to this settlement, the result is a good reason to give pause before going to OFAC with a voluntary disclosure. While much goes into a decision of whether to make a voluntary disclosure, it is important to assessÂ enforcement actions like this one to determine carefully if efforts spent to prepare, submit and deal with a voluntary disclosure are worth it.

Clif adds: If shipping an item to Iran without a license even after the Iranian end-user tells you that a license is required isn’t enough to make something an “egregious” violation, I am not sure the word egregious has any meaning left.

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Apr

17

Now We Are More

Posted by Clif Burns at 11:34 pm on

Category: General

Pay attention to the by-lines on posts here now that my colleague George Murphy has agreed to contribute posts. The post just above this one — the one about the “non-egregious” OFAC violation by San Corporation — comes from George. You can read more about George here.

If you say nice things in the comments to his post, we might be able to convince him to stick around.

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Apr

16

Export Control Final Transition Plan Announced

Posted by Clif Burns at 11:25 pm on April 16, 2013

Category: DDTC • Export Reform

Today DDTC released its final transition plan for the first wave of export control reform under which certain items in Category VIII of the USML are transitioned to a new “600 series” of controls in Category 9 of the CCL. Of course, a major concern of exporters has been where to file licenses for the transitioned items between the date of the publication of the rule and its effective date.

This concern was exacerbated by some confusing language in the proposed transition plan released last summer. That was this language:

License applications [for transitioned items] received by DDTC within the 45 days following the final ruleâ€™s publication, but before the rule becomes effective, will be adjudicated only when the applicant provides a written statement certifying that the export or temporary import will be completed within 45 days after the effective date of the final rule.

The concern here, of course, was what would happen to licenses for these items that were filed after the 45 days from publication but before the effective date of the rule when, presumably, BIS would be able to issue licenses for the transitioned items. When informal information subsequently suggested that the period between publication and effective date would be 180 days, the concern was magnified: this would create a licensing limbo of 135 days when DDTC would not accept or grant applications and BIS would not grant them.

Under the final version of the transition plan, this problem goes away:

License applications will be accepted by both DDTC and BIS for items moving from the USML to the CCL, but BIS will not issue approved licenses for such items until on or after the applicable effective date.

Licenses for transitioned items granted by DDTC during the 180-day transition period will be valid for two-years unless an earlier expiration date is specified in the license.

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Apr

9

Australian Court Sentences Export Defendant to Good Behavior

Posted by Clif Burns at 6:54 pm on April 9, 2013

Category: Arms Export • Criminal Penalties

Ian Chow https://www.facebook.com/photo.php?fbid=410491802970&set=p.410491802970&type=1&theater (Fair Use)

ABOVE: Ian Chow

Ian Chow, an Australian expatriate living in New Guinea and who is the managing director of the Lae Biscuit Company in Lae, New Guinea,*Â pleaded guilty to charges in Australia that he illegally exported ammunition components to New Guinea. His sentence may surprise those here in the U.S. used to seeing export defendants walloped with 5 year sentences for export violations. Mr. Chow was ordered to pay $10,000 to a charity and sentenced to a 12-month good behavior bond. (A good behavior bond is an Australian form of probation where the defendant is fined rather than jailed if he misbehaves.)

Apparently the sentence was based on testimony the court heard of the motive for the shipment of the ammunition components to New Guinea:

Chow took a short cut by shipping the items to PNG without permission from authorities, as the shooting club and police officers in Lae were short of ammunition when Chowâ€™s house burnt down in February last year. Chow kept ammunition for the club at his house and it was destroyed in the fire.

You’d think that the Lae police might keep their ammunition somewhere other than the house of the guy who runs the local cookie company, but I have to imagine that many other things are done in an unconventional manner in New Guinea.

*An interesting bit of trivia: the Lae airport was the last place Amelia Earhart was seen alive.

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