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Archive for September, 2016

Sep

14

Burma Sanctions Will Sunset (No OFAC Action Necessary)

Posted by Clif Burns at 11:46 pm on September 14, 2016

Bagan by Staffan Scherz [CC-BY-SA-2.0 (http://creativecommons.org/licenses/by-sa/2.0)], via Flickr https://flic.kr/p/aAeXsZ [cropped and processed] President Obama announced today, after meeting with the newly elected President of Burma, that he intends to lift all remaining sanctions on Burma. With unusual alacrity, at least for the Office of Foreign Assets Control (“OFAC”), that agency issued FAQ #480 stating that its sanctions against Burma would disappear the moment that the President issues an executive order terminating the national emergency with respect to Burma. In other words, the Burmese Sanctions Regulations will immediately become ineffective even if it takes, as it probably will, months for OFAC to get around to pulling them down or issue a rule repealing them.

Of course, and not surprisingly, that FAQ may not be true. The restrictions on the import of jade and rubies from Burma were imposed by the infelicitously named “Tom Lantos Block Burmese JADE (Juntaâ€™s Anti-Democratic Efforts) Act of 2008” and cannot be removed until the White House makes certain notifications to Congress.

There is also the question of the status of blocked individuals after the President declares that the national emergency with respect to Burma is over. Section 5(b)(1) automatically blocked the property of certain persons in Burma and section 5(h) requires congressional notification before waiving that sanction. In 2009, the President issued a waiver as to all such persons not listed on the SDN List and that waiver has been congressionally notified.

But is President Obama really intending to remove everyone on the SDN List designated under the Burma sanctions including Steven Law and his companies such as Asia World? Law is on the list for narcotics trafficking, and there seems little reason to rehabilitate him simply because Burma has a democratically elected government. But if Law and his companies remain on the SDN list and the regulations go away, what happens to General License No. 20, which permits goods to be exported to Burma through Asia World ports? Without that license, exports to Burma from the United States will effectively be halted again.

Perhaps we need a few more FAQs.

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Sep

13

Flowers for Ahmadinejad

Posted by Clif Burns at 9:25 pm on September 13, 2016

Sorbet Autumn Select Mix Viola via http://photolibrary.ballhort.com:8085/pasapprovedimages/api/v1/asset/319358/preview [Fair Use] The Office of Foreign Assets Control (“OFAC”) today fined a company a whopping $4,320,000 for selling things to Iran. Oh wow, you say, this must have been some really bad stuff like, say, high-powered computers or drones, right? Yep, really dangerous stuff — flower seeds. As in, the things you bury in your backyard and hope sprout up as zinnias.

Well, okay, so maybe they didn’t sell anything dangerous. The company, which is PanAmerican Seed in Illinois, must have sold like a billion dollars worth of seeds, right? Um, we don’t know the value of the seeds. For some reason OFAC won’t say. ThisÂ is odd because OFAC almost always says what the value of the shipments was. OFAC does say something surpassingly strangeÂ about the dollars involved, something it’s never said before. In aggravating factor 4, OFAC says this:

PanAm Seed engaged in this pattern of conduct over a period of years, providing over $770,000 in economic benefit to Iran.

Now this is definitively not the value of the shipment. If $770,000 was the price of the exported goods, then PanAmerican which, presumably, was paid for the seeds by people in Iran, got the $770,000 benefit, or at least however much of that price represented its profit. I suppose this means the profit Iranians made after planting the seeds and selling the flowers, although how OFAC figured that out is rather hard to discern. AndÂ if the profits made by Iranian on the seeds is the economic benefit to Iran, then the value of the shipments had to beÂ well south of that figure.

Why OFAC would go to such length to obfuscate the value of the shipments is unclear. Leaving aside that we are talking about petunia seeds here, PanAmerican Seed, at least if OFAC is to be believed, did not behave well. Apparently, it knew what it was doing; it concealed the ultimate destination of the shipments; it refused to cooperate with OFAC when it was turned in; and it apparently provided “inaccurate, misleading, or incomplete” information to OFAC

In any event, it still seems that OFAC has better things to do than to tiptoe through the tulips in Tehran.

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Sep

7

Brace Yourself: OFAC Fines Orthodontic Device Company

Posted by Clif Burns at 10:02 pm on September 7, 2016

Category: General

WCT Headquarters via http://www.worldclasstech.com/images/history/WCT-Building.jpg [Fair Use] Today the Office of Foreign Assets Control (“OFAC”) fined Oregon orthodontic device manufacturer World Class Technology Corporation $43,200 for seven shipments of orthodontic devices valued at $59,886 to Iran. The shipments in question were transshipped through Germany, UAE and Lebanon.

OFAC noted that there were three aggravating factors. First, the company did not confess its sins voluntarily to OFAC but instead got caught. Second, company executives knew the orthodontics were going to Iran. Third, the company disrespected OFAC by not having an OFAC compliance program until 2008.

There is, of course, more than a little absurdity in the idea that every company in the U.S. must have an OFAC compliance program or bear the wrath of the agency. WCT is estimated to have between 50-99 employees. Its headquarters are pictured on the left. It has under $20 million in revenue per year currently and, no doubt, much less before it adopted its compliance program in 2008. How many agencies must small businesses bow down to through adopting compliance programs designed to assure that they do not transgress the regulations of that agency? Would any of them ever get any business done if they did?

OFAC cited five mitigating factors, which presumably saved WTC from a company crushing $1.75 million fine which OFAC noted was the statutory maximum. First, the transaction would likely have been licensed. Second, WCT had no sanctions history in the previous five years. Third, WCT agreed to toll the statute of limitations — the penalty imposed today covered violations dating back to 2008. Fourth, WCT ultimately adopted a compliance program. Fifth, WCT “lacked commercial sophistication in conducting international sales.”

The real face-palm moment here is mitigating factor five. OFAC admits that WCT should be given a break because it didn’t have the commercial savvy to understand that it was violating OFAC regulations. Only a few nanoseconds before OFAC was criticizing the company for not having an OFAC compliance program. How does this add up? Do they cancel each other out? More likely, OFAC wants to have it both ways rather than to confront the ugly fact that it has absolutely no outreach to small businesses like WCT, and itself bears some measure of blame for the exports of unsophisticated companies.

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Sep

2

Export Defendant Pays for Requesting Jury Trial

Posted by Clif Burns at 12:05 pm on September 2, 2016

Category: BIS • Criminal Penalties

ABOVE: Alexander Fishenko

This blog has closely followed the case involving Alexander Fishenko and his company ARC Electronics, mostly because the government larded the export charges against Fishenko with bogus “spying” charges premised on an alleged charge that he failed to register under the Foreign Agent Registration Act. Â Those charges were bogus because the act makes clear that selling goods to a foreign government is not an activity that requires registration.

A number of the employees of ARC were also indicted on export charges in connection with the exports to Russia without the required BIS licenses. One of them, Anastasia Diatlova, the most junior sales clerk in the organization, is now apparently facing harsher sentencing than other sales clerks at ARC because she ticked off the government by making them go to trial, or at least that’s the claim made in the Sentencing Memorandum filed by Ms. Diatlova’s attorneys. That memo argues that she should get the same sentence of time served as the other sales clerks in the organization. (Fishenko, who owned Arc and ran the operation, pleaded guilty and was sentenced to ten years.)

Apparently time served was offered in the plea deal but Diatlova went to trial anyway. Â That decision was premised on the reasonable belief thatÂ someone who had only an eighth grade education, received little if any compliance training, and had previously refused to sell parts where she knew them to be restricted was unlikely to have knownÂ that the one export with which she was involved and charged was illegal.

But, juries being juries, and with the prosecutors no doubt screaming “spy” and “Russia” at every available opportunity, the jury convicted her anyway. And now the government wants revenge and has taken the offer of a sentence of time served off the table. That is, of course, their right, but it seems petty and almost despicable in the case of a $15/hour sales clerk who sold an item that probably would have been licensed if one had beenÂ requested. One has to wonder why the government was chasing her anyway other than as potential low-hanging fruit that could result in another notch on their holsters.

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