Apr

24

It Takes Two to Argentine Tango


Posted by at 5:10 pm on April 24, 2013
Category: DoJFCPASEC

By WestportWiki (Own work) [CC-BY-SA-3.0 (http://creativecommons.org/licenses/by-sa/3.0)], via Wikimedia Commons http://commons.wikimedia.org/wiki/File%3ARalph_Lauren_Store%2C_NYC.jpg

The U.S. Justice Department announced yesterday that Ralph Lauren Corporation agreed to pay $882,000 to resolve alleged FCPA violations. According to a Justice Department press release, the allegations involved Ralph Lauren trying to secure “improper customs clearance of merchandise” from Argentine government officials, including “clearance of items without the necessary paperwork … [and] of prohibited items” or “avoid[ing] inspection entirely.” The Justice Department alleged that Ralph Lauren employees made bribes through a customs clearance agency using “fake invoices” to justify the payments.

In addition, the U.S. Securities and Exchange Commission announced that, in parallel proceedings, Ralph Lauren agreed to pay $734,846 in disgorgement and prejudgment interest for other related alleged FCPA violations that took place between 2005 and 2009. The SEC also announced that its non-prosecution agreement with Ralph Lauren was the SEC’s first involving “FCPA misconduct.”

While the SEC first is noteworthy, a special spotlight should be shown on Argentina.

Since early last year, the Argentine government has enforced a trade policy World Trade Organization member countries have described to the WTO as a “de facto import restricting scheme” because Argentine law requires non-automatic, government pre-approval on all imports. WTO members have alleged that companies have experienced long delays in getting approval and that some companies report receiving calls from Argentine government officials telling them that they must undertake “trade balancing commitments prior to receiving authorization to import goods.” This “trade balancing” is part of Argentina’s informal adoption of a policy that requires companies seeking to import products to export “dollar for dollar” goods from Argentina or “establish production facilities in Argentina.”

As described to the WTO, the current situation in Argentina sounds ripe for situations like the one involving Ralph Lauren and other U.S. exporters to happen again. Notwithstanding the FCPA’s exception for facilitating payments, situations where foreign government officials require some form of quid pro quo for goods coming into a country need to be examined carefully to determine whether further interactions with the official may implicate applicable anti-corruption laws.  Obviously, if the quid pro quo goes to the government and not the government official, there is not an FCPA issue.  But where the requested quid pro quo is supposed to go to the government official personally, then no matter how tempting is this offer to relieve the U.S. exporter of Argentinian import burdens, the best response may be to leave the dance floor.

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Apr

23

Arms Treaty Foe Cites Export Reform As Reason for Opposition


Posted by at 1:26 pm on April 23, 2013
Category: Arms ExportExport Reform

Baker Spring http://www.youtube.com/watch?v=kY9ZTCu2wWc (Fair Use)
ABOVE:Baker Spring

I don’t know who Baker Spring is, other than some flak for a Washington think tank, but he has, for some reason, decided to join Iran, North Korea and Syria in opposing the U.N. Arms Trade Treaty. According to Baker, the treaty will interfere with the export control reform process:

There are many reasons to dislike the ATT, but one of them … it [sic] that it urges signatories to regulate a wide range of arms exports just as the U.S. reform process is trying to build higher walls around fewer items.

For instance, the new rules on aircraft and turbine engines transfer these items from the strict and inflexible Munitions List, maintained by the Department of State, to the more flexible Commodity Control List, maintained by the Department of Commerce. …

The review process has been meticulous, involving the Departments of Defense, State, and Commerce; the White House; Capitol Hill; industry; allied governments; think tanks; and other interested parties. The specialists in the Administration who have worked in this complex area of federal regulation deserve to be commended for achieving this major milestone in the reform effort. Their work should not be frustrated by uncertainties created by the ATT.

Let’s leave aside for the moment the silliness of this argument given that the White House, which is spearheading export reform, also supports the Arms Trade Treaty. The United States did, after all vote for it. (As did everyone else in the world but North Korea, Syria, and Iran.) If the White House thought that the treaty would gum up export control reform, it’s doubtful it would have supported the treaty.

The bigger problem with Baker Spring’s argument is that he apparently has not read the treaty that he is criticizing or, at least, he does not understand it. The treaty simply requires adherents to impose export controls on the items listed in Article 2, which the United States already does and which it will continue to do whether the item is on the USML or the CCL.

Baker Spring also has not read, or, at least he does not understand, the export control reform proposals that were just adopted. Certainly if he did, he wouldn’t have come up with this whopper quoted above:

For instance, the new rules on aircraft and turbine engines transfer these items from the strict and inflexible Munitions List … to the more flexible Commodity Control List …

Er, no, aircraft and turbine engines are not being transferred to the CCL. Some are and some aren’t. Article 2 of the ATT covers “combat aircraft” and it is safe to say that all those aircraft remain on the USML. As to turbine engines, they are not even covered by the Arms Trade Treaty at all. Article 4 covers “parts and components” such as aircraft engines but only “where the export is in a form that provides the capability to assemble the conventional arms covered under Article 2,” in other words, only when the entire aircraft or other article is exported in the form of disassembled parts and components. An export of a turbine engine by itself obviously fails to meet that criterion.

Somehow I suspect that Baker Spring’s objections to the Arms Trade Treaty are the result of considerations other than the flimsy excuses he proffered in the article at hand.

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Copyright © 2013 Clif Burns. All Rights Reserved.
(No republication, syndication or use permitted without my consent.)



Apr

18

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


Posted by at 8:11 pm on April 18, 2013
Category: BISEntity List

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.  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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Copyright © 2013 Clif Burns. All Rights Reserved.
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Apr

17

An Egregious “Non-Egregious” Sanctions Violation?


Posted by at 11:36 pm on April 17, 2013
Category: Economic SanctionsIran SanctionsOFACSanctions

Source: San Corporation (Fair Use)OFAC announced on Friday a settlement with California-based SAN Corporation (“SAN”) for an alleged violation of the Iranian Transactions Regulations that occurred in September of 2007.  OFAC alleged that SAN sold nutritional supplements to an entity in Kuwait with knowledge that their end use was to be in Iran.  SAN agreed to pay $22,500 to settle liability for the alleged violation.  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) 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 assess 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 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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Copyright © 2013 Clif Burns. All Rights Reserved.
(No republication, syndication or use permitted without my consent.)


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