Archive for November, 2014


Nov

5

Ya Get What Ya Pay For


Posted by at 11:18 pm on November 5, 2014
Category: BIS

Happy 50th by Cochise College via Cochise College official Instagram account http://instagram.com/p/tTViN5IHPh/ [Fair Use]Let’s see. I have an export question that’s troubling me. So what should I do? I know. Let’s write the local newspaper and ask them! What could possibly go wrong?

Dear M & M: I am interested in exporting a product overseas. This product does not require an export license. I am not sure who the end user will be as they are selling to a third party. Is there something I need to do to make sure I am in compliance with regulations?

— Randy

The “answer” comes from Mark Schmitt, director of the Small Business Development Center at Cochise College; and Mignonne Hollis, executive director at the Sierra Vista Economic Development Foundation. (Please, no Mork and Mindy jokes.) Mark and Mignonne do not even stop for a moment to wonder how Randy, who appears to know almost nothing about exporting, is so certain his item does not require an export license and respond:

Dear Randy: If your item falls under the jurisdiction of the U.S. Department of Commerce and is not listed on the Commercial Control Lists, and it does not require an export license it is designated as EAR99.

Generally the majority of commercial products are designated EAR99 and generally will not require a special license to be exported or imported into this country and later re-exported.

Leaving aside the “Commercial Control Lists” gaffe, the first sentence makes almost no sense to me, and one can imagine what sense it makes to Randy. How is Randy supposed to figure out whether his item “falls under the jurisdiction of the” Commerce Department? And if I have an ECCN that doesn’t require a license to a particular jurisdiction does that make my item EAR99? But forget about all that: most products, they say, are EAR99, so Mark and Mignonne are certain that Randy’s item must be as well. Good thing they didn’t print Randy’s last name.

However, if you plan to export an EAR99 item to an embargoed or sanctioned country, to a party of concern, or in support of a prohibited end-use, you may be required to obtain a license. The Bureau of Industry and Security (BIS) have what they call advisory opinions relating to what they call red flags when exporting to another country. The following link has general topics one should check out if you suspect something is wrong http://www.bis.doc.gov/index.php/policy-guidance/advisory-opinions.

If Mark and Mignonne were teetering off balance in the first two paragraphs, they have gone completely off the rails here. Who knew that the advisory opinions talked about red flags or would help Randy realize that not knowing the end customer might get him in hot water without further investigation and/or contractual undertakings by the intermediate consignee?

Not knowing the end user especially if your product can be refitted to serve another purpose or knowingly suspect a third party reselling your items to a country that the U.S. has sanctioned can get you into trouble.

Of course, not knowing the end user can be a problem whether or not your product can be refitted. And if you know that your intermediate consignee is selling to a sanctioned country, knowing your end user is not going to help at all.

Finally, Mark and Mignonne  say to Randy what they should have said from the outset, indeed, what should have been the only thing they said to Randy

The Export Counselling Division of the Office of Exporter Services can be reached at any of the numbers below …

Next week Mark and Mignonne attempt to explain to a confused reader why string theory is a possible explanation for the commutation rules of quantum mechanics. Stay tuned.

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Copyright © 2014 Clif Burns. All Rights Reserved.
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Nov

4

OFAC to Foreign Airlines: Iran Sanctions Trump Your Safety


Posted by at 8:12 pm on November 4, 2014
Category: Iran SanctionsOFAC

Air France 747-428 by Aero Icarus [CC-BY-SA-2.0 (http://creativecommons.org/licenses/by-sa/2.0)], via Flickr https://www.flickr.com/photos/aero_icarus/5939459613Today the Office of Foreign Assets Control cryptically announced a change in its FAQs relating to foreign aircraft that overfly or make emergency landings in Iran. The agency merely stated that it had revised FAQ 417 without describing the difference between the old and new FAQ or why the change was made. Of course, you might assume that OFAC wanted to make it clear that if your plane was about to fall out of the sky it was okay to make an unscheduled landing in Iran — passenger safety, and all that. But you would be wrong.

The old FAQ, which you can find here, said that non-U.S. airlines could overfly Iran and make emergency landings there as long as no payments were made to or through any of the specifically designated banks in Iran (like Bank Melli) or any entities on the SDN list (other than, of course, agencies and instrumentalities of the Iranian government). The new FAQ, however, adds a new wrinkle: the payments now cannot involve the U.S. financial system if a foreign carrier is involved; the U.S. financial system may only be used for U.S. carriers, which, under 31 C.F.R. § 560.522, are permitted  to overfly and make emergency landings in Iran.

This policy change comes on the heels of news reports (like this one and this one) that foreign carrier overflights over Iran have recently increased. Why? Because no one wants to get blown out of the sky while flying over Iraq or Ukraine. Both Air France and Virgin Atlantic have suspended flights over Iraq.

Of course, you may say, certainly foreign carriers can find non-U.S. financial institutions to handle the payments to Iran. That, of course, may be the case, although given all the recent huge fine on foreign banks for Iran transactions, many of these banks may simply be unwilling to run the risk of further penalties given the small amounts they are likely to make handling these payments.

 

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Copyright © 2014 Clif Burns. All Rights Reserved.
(No republication, syndication or use permitted without my consent.)