ExportLawBlog » 2016

Archive for January, 2016

Jan

12

Let’s Do the Time Warp Again

Posted by Clif Burns at 6:42 pm on January 12, 2016

Category: AES • CBP

Checkpoint Charlie Berlin by Francisco Antunes [CC-BY-SA-2.0 (http://creativecommons.org/licenses/by-sa/2.0)], via Flickr https://flic.kr/p/j3Maw2 [cropped] Over the holidays I watched on Amazon “The Man in the High Castle,” a television adaptation of Philip K. Dick’s Hugo Award winning novel of the same name about an alternate reality in which Germany and Japan won World War II. So I was a little surprised when, thanks to a reader, I stumbled into an alternate reality in the non-award winning Code of Federal Regulations where the Cold War never ended and the Berlin Wall never fell. The author of this fiction was not an esteemed science fiction writer like Philip K. Dick but instead our very own Customs and Border Protection (“CBP”) who are apparently are too busy throwing innocent people in jail to keep up with (vaguely) current events.

Of course, I’m referring to section 19 C.F.R. Â§ 4.75(c) which details countries for which vessels may not be cleared until complete manifests and shippers export declarations are filed. And on that list you will find an entry for this country:

German Democratic Republic (Soviet Zone of Germany and Soviet Zone sector of Berlin)

(Not to mention the defunct Union of Soviet Socialist Republics and the equally vanished Polish People’s Republic and Czechoslovakia.) Â Oddly, the CPB amended these regulations in 2000, more than 11 years after the Soviet sector went poof, and yet the reference to East Berlin, Czechoslovakia, the Polish People’s Republic and the USSR all remained. I’m wondering whether I will find lurking in the somewhere in CPB’s rulesÂ a provision dealing with exports to the Confederate States of America.

The practical impact of CPB living more than 25 years in the past may be limited. Under the current rules set forth in 15 C.F.R. Â§ 30.4 the EEI must be filed through AES in all instances prior to the vessel leaving the United States, whether it is bound for England, France, Lilliput, Middle Earth, Flatland, Prussia, Rhodesia, Tattoine, Naboo, Endor, Grand Fenway or Freedonia.

Permalink

Comments (1)

Jan

8

Hellfire in Cuba; Brimstone at DDTC

Posted by Clif Burns at 9:04 am on January 8, 2016

Sailor lower [sic] a Hellfire missile into it's case by Official U.S. Navy Page via Flickr https://flic.kr/p/dpaBVh [Public Domain - Work of U.S. Government] Oops. Somebody accidentally sent a Hellfire missile to Cuba, and Cuba doesn’t want to give it back. According to an article (subscription required) in the Wall Street Journal, a Hellfire missile that was legally exported by Lockheed Martin to Rota, SpainÂ for NATO exercises, got sent by a freight forwarder (or spy or crook) to Cuba after the exercises were over instead of back to Lockheed Martin in Florida where it was supposed to go. Apparently the freight forwarder in Madrid, which was supposed to put the missile on a truck headed to Frankfurt where the missile would catch a flight back to Florida put the missile on a truck headed to Charles de Gaulle outside Paris where Air France obligingly put the missile on a flight to Cuba. And now there’s hellfire to pay.

A State Department official interviewed by the Journal said that “many” of the 1500 voluntary disclosures filed each year involved mis-shipments, although the precise number is not tracked. The official added:

Mis-shipments happen all the time because of the amount and volume of the defense trade.

The kicker in all this, however, is this:

If it turns out that the Hellfire was lost because of human error, the criminal probe would end and the State Department would have to determine whether to pursue a settlement with Lockheed Martin over the incident.

This is, of course, completely ridiculous. Granted that there is strict liabilityÂ byÂ the exporter for export violations, that does not mean (in any rational universe outside DC) that Lockheed has committed a violation in the first place if someone other than Lockheed, for whatever reason and without the fault of knowledge of Lockheed, put the defense article on the wrong flight. And particularly where this wasÂ done by Air France, no less, which regularly sends ordinary baggage bound for one place to Tahiti or some other distant former French colony. And let me remind DDTC that this item would have gone out underÂ a DSP-73 on which every single freight forwarder and intermediate consignee who touched the missile was disclosed to and approved by DDTC. Maybe DDTC should be fined for approving the freight forwarder or intermediate consignee responsible for this screw-up.

Permalink

Comments (7)

Jan

6

Writing Regulations Is Hard

Posted by Clif Burns at 8:36 pm on January 6, 2016

Category: Cuba Sanctions • OFAC

Cuba - Havana - Car by Didier Baertschiger [CC-BY-SA-2.0 (http://creativecommons.org/licenses/by-sa/2.0)], via Flickr https://www.flickr.com/photos/didierbaertschiger/11785935544[cropped]

In late December, the Office of Foreign Assets Control (“OFAC”) updated its Cuba FAQs to add questions #57-61 on insurance issues. Â Naturally, there is no explanation for why these were added but if you supposed that they were added to clarify some drafting screw-up in the Cuba regulations, you’d probably be right. Â You can almost hear them saying over at OFAC: Â “Don’t worry about the precise language, we can always fix it with an FAQ. Â Pay no attention to that nonsense in section 552(a)(1)(D) of the Administrative Procedure Act about publishing in the Federal Register ‘interpretations of general applicability.’ Â That only applies to other agencies.”

The issue addressed by the new FAQs is the terrible drafting of Â Note 2 to section 515.560 of the CubaÂ Assets ControlÂ Regulations, which says this:

This section authorizes the provision of health insurance-, life insurance-, and travel insurance-related services to authorized travelers, as well as the receipt of emergency medical services and the making of payments related thereto.

The problem here is the phrase “authorized traveler.” Who isÂ an authorized traveler? Is it just a U.S. person traveling to Cuba under a general or specific license or does it also include a foreign person who is authorized because there is no prohibition on foreign citizens traveling to Cuba and no requirement that the foreign traveler obtain permission from OFAC for such travel? It seems to me that “authorized” can legitimately be read to include foreign travelers to Cuba.

Not so fast, according to the newly added FAQ #59

59. May U.S. insurers issue policies and pay claims related to group health, life, and travel insurance on behalf of third-country nationals traveling to or within Cuba?

Yes, provided that the insurance policy is as global policy, and not specific to the third-country nationalâ€™s travel to or within Cuba.

But Note 2 says nothing about the travel insurance needing to be a global and not a specific policy. So “authorized traveler” has now effectively been redefined to exclude foreign travelers, all of whom are permitted to travel to Cuba. This was not a particularly thorny drafting issue for OFAC: the issue could have been easily and directly resolved by adding “U.S.” to “authorized travelers” when the rule was initially written and promulgated

The issue that this raises is whether OFAC, or any other agency, is entitled to regulate by Internet pronouncements notwithstanding the APA’s insistence that it use the Federal Register to publicizeÂ agency interpretations. If an insurance company reads Note 2 to cover foreign authorized travelers, is it culpable for not having scoured OFAC’s website for contrary interpretations when no such contrary interpretation appears anywhere in the Federal Register? When agencies expect those subject to their powers to respect the law, then the agencies themselves need to respect the law.

Permalink

Comments Off

Jan

5

The Doctor Says You’re Gonna Die, Betty [Updated]

Posted by Clif Burns at 8:52 pm on January 5, 2016

Category: Cybersecurity • OFAC

city lights by frankieleon [CC-BY-SA-2.0 (http://creativecommons.org/licenses/by-sa/2.0)], via Flickr https://flic.kr/p/6mAPhC [cropped] The Office of Foreign Assets Control (“OFAC”) released on December 31 its cybersecurity regulations implementing Executive Order 13694 of April 1, 2015 (â€œEO 13694â€), which permits the designation and blocking of individuals and companies that have engaged in “cyberenabled activities” that threaten the “national security, foreign policy, or economic health or financial stability.” Although no designations have been made under this order in the nine months since its issuance, OFAC didn’t want to pop open any New Year’s Eve bottles of champagne without pushing these regulations out the door. Since OFAC has yet to release regulations implementing Executive Order 13685, making Crimea the most sanctioned place on the face of the planet, this rush to implement an order under which no one has been designated is a bit puzzling. Low hanging fruit, I suppose.

The regulations are nothing more than the standard template regulations for blocking programs with Â a prohibition of actions proscribed by the executive order, standard definitions, a provision implementing the 50 percent rule, and a few other basics. Three standard exceptions are provided authorizing (1) deduction of financial institution service charges from blocked accounts; (2) provision of certain legal services and (3) provision of unscheduled emergency medical services.

The emergency medical service exception, which appears in a number of regulations, is worthy of some further discussion. It addresses the issue of what happens in the case that a designated hacker or other blocked person is hit by drunken cab driver and is bleeding to death on the streets. A U.S. doctor happens by. Can he stanch the bleeding? In most blocking regulations this would be a problem because the regulations prohibit providing services to a person whose property and interests in property are blocked. Section 537.201(b)(1) of the Burma Sanctions, for example, contains such a provision. That provision would, on its face, prohibit the doctor from treating a blocked Burmese former junta member who was bleeding to death before his eyes. Hence the need for some kind of exception for unscheduled emergency treatment.

The new cybersecurity sanctions regulations do not directly prohibit providing services to a person blocked under those regulations but they do prohibit violating E.O. 13685 which itself has a provision prohibiting the provision of service to a person whose interest in property is blocked. Â Thus the emergency medical exception is needed so that the doctor canÂ apply a tourniquet without risking a jail sentence.Â Payment for these services, if they were sought, would be problematic without the exception because any payments to the doctor by the bleeding victim would have to be blocked. The cybercrime regulations would, however, permit this payment.

But, but, and there’s always a but when sanctions regulations are involved, these emergency services can only be provided in the United States. If the bleeding victim is on the streets of say, Canada, the U.S. doctor can’t perform or be paid for his services. He’d have to stand by and let the victim die. Fortunately, most doctors have bigger hearts than OFAC.

(The title of this post, by the way, refers to a naughty joke involving two famous actresses which can’t be repeated on a family-oriented blog such as this but which I hope some of you may have heard before. . . )

Permalink

Comments (3)