ExportLawBlog

Mar

25

Seriously Bad People Who Have Done Seriously Bad Things. . .

Posted by Clif Burns at 6:41 pm on March 25, 2013

Category: DDTC

Blue Lantern? Have you had a license application pending at the Directorate of Defense Trade Controls (“DDTC”) to export a defense article mysteriously denied? Â If so, you might have been “blue lanterned,” or, more accurately, the end user might have been “blue lanterned.”

The oddly and opaquely named “Blue Lantern” program at DDTC refers to a process whereby U.S. embassy officials abroad and other domestic government officials conduct investigations into proposed end users mentioned in DDTC license applications. Â The result is that sometimes a source whispers something derogatory about the end user into the investigators ear and, well, that’s the end of that license application.

Every year DDTC issues a report on its Blue Lantern report which provides some interesting information and statistics on the program, although regrettably always leaving the origin of the program’s name shrouded in mystery.* Â This year’s report was just released and there are some interesting tidbits buried in it.

The report indicated that in 2012, a total of 820 Blue Lantern checks were initiated, up from 783 in 2011 and 536 in 2010. Of those, 20 percent resulted in unfavorable determinations. Interestingly, the report noted that the unfavorable rate for inquiries conducted in Europe was 27 percent, among the highest for any region, even though historically the rate of unfavorable determinations in Europe is among the lowest of all the regions. The report explained the discrepancy as

primarily due to thirty unfavorable checks involving a single entity that failed to sufficiently cooperate with DTCCâ€™s inquiries and also revealed stockpiling concerns.

Late in the report it is revealed that the commodities produced by this “single entity” were spacecraft systems, which may give alert readers enough information to speculate as to who that single entity might be.

My favorite unfavorable determinations, however, had to be one involving a Central American firearms dealer who sold to an individual “known to resell firearms from his car” and the one involving “an Eastern European individual who attempted to acquire a weapon simulator under the premise of using it in a home theatre gaming system.” (And here I thought I had every possible gadget in my home theatre system!)

*See previous posts here and here about the possible origin of “Blue Lantern” as the program name.

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

Mar

19

Government Ministers Who Are Also SDNs Can Make Deals Hazardous

Posted by Clif Burns at 8:49 pm on March 19, 2013

Category: Burma Sanctions

Burma The Office of Foreign Assets Control (“OFAC”) has just released new guidance on the Burma sanctions and, more importantly, what’s left of the Burma sanctions. Buried at the end of the guidance is something of an answer to a conundrum we have addressed before, namely, if a government member is on the SDN list, what restrictions are thereby imposed on dealings by a U.S. person with that government.

This blog first addressed that question not too long ago when Specially Designated NationalÂ Nalinee Taveesin was appointed the Prime Minister’s Office Minister of Thailand. I suggested that this meant that U.S. persons and companies could not deal with her either in her private or her official capacity and cautioned that transactions in which she was any way involved for the Thai government should be avoided.

That question is posed again by Burma where many members of the current government are holdovers from the military regime and remain on the SDN list. The omnipresence of designated cronies of the old junta in Burma was uncomfortably brought home to U.S. Assistant Secretary of State Jose Fernandez when he got caught in aÂ grip and grin photo op in Burma with the Union of Myanmar Federation of Chamber of Commerce and Industry President (and Specially Designated National) Win Aung. Oops.

Here is what OFAC has to say about Burmese government officials who also happen to be SDNs:

285. If a Burmese Government minister is an SDN, how does that impact the ministry he leads?

A government ministry is not blocked solely because the minister heading it is an SDN. U.S. persons should, however, be cautious in dealings with the ministry to ensure that they are not, for example, entering into any contracts that are signed by the SDN.

Unfortunately, the more you examine this “guidance,” the less actual guidance it provides. The problem, of course, is with the phrase “for example” stuffed into the last sentence. The SDN can’t “for example” sign any contracts. But what else “for example” would pose a problem? Negotiating the contract? Approving the contract? Recommending changes to the contract? Taking actions that implement the contract? To be safe, a U.S. company needs to make sure that the SDN official has never heard of the contract and is on a different continent when the contract is negotiated, signed and performed.

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

Mar

12

How Many Lawyers Does It Take to Export a Lug Nut?*

Posted by Clif Burns at 6:12 pm on March 12, 2013

U.S. Air Force Photo http://www.af.mil/shared/media/photodb/photos/021105-O-9999G-056.jpg (Public Domain) MichÃ¨le Flournoy, a former undersecretary of defense, writes today in the Wall Street Journal in favor of export law reform in an op-ed piece (subscription required) titled “Want to Export an F-16 Fighter Jet?” Probably a better title would have been “Want to Export F-16 Fighter Jet Parts?” since that’s what her whole piece is about.

In her op-ed, she says

Over the past six decades, Washington has developed a system that applies one-size-fits-all bureaucratic requirements to defense exports. The system is plagued by maddeningly lethargic timetables for approving technology transfers. It handles airplane windshield wipers essentially the same way it handles air-to-air missiles. It forces American companies and foreign partner militaries to await separate approvals for every latch, wire and lug nut on an F-16 fighter jetâ€”even though the U.S. government has already approved the export of the whole aircraft.

Although I see what Ms. Flournoy is trying to get at, she hasn’t said it very accurately at all. For starters, not every latch, wire and lug nut on an F-16 requires separate export approvals when shipped separately from an F-16. Parts that are not “specifically designed and modified” for military or civil aircraft don’t require separate export approval. If an item is usable on both civil and military aircraft but is standard and integral equipment covered by a civilian aircraft type certificate it is controlled by Department of Commerce regulations, which means it will not require a license for exports to most destinations. And not to be too picky but Ms. Flournoy’s point also ignores the exemption in section 123.16(b)(2) of the ITAR for exports of low value parts to a previously approved end user.

This is not to say that there is not room for reform in how the U.S. government handles exports of aircraft parts; it’s only to say that not every latch, wire and lug nut requires a license right now.

*One, but the lug nut really has to want to be exported.

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

Mar

11

Qantas Jet Still Doesn’t Call Australia Home

Posted by Clif Burns at 5:01 pm on March 11, 2013

Category: Iran Sanctions

Koala Climbing Tree by David Iliff http://commons.wikimedia.org/wiki/File:Koala_climbing_tree.jpg (CC BY-SA 3.0) Qantas says it is shocked, shocked that a retired 747 it sold from a desert airplane graveyard in Arizona to a UAE middleman wound up in Iran. The sale came to light back in April 2012 when the Bureau of Industry and Security (“BIS”) issued a temporary denial order against Sayegh Group Aviation, the U.A.E. company that bought three 747s from Qantas and had already, through a series of interconnected straw companies, leased one of the aircraft to Aban Air in Iran.

According to the Sydney Morning Herald story linked above, the Iranian deal was uncovered by CSDS Aircraft Sales and Leasing, a California-based company which blew the whistle on the deal after Qantas rebuffed its own efforts to buy the planes from Qantas. CSDS said it had previously been approached by Sayegh to purchase aircraft, but that these approaches had raised “red flags” for it. When CSDS heard that Qantas sold the planes to Sayegh instead, it contacted U.S. authorities. The President of CSDS told the Sydney Morning Herald that Qantas “could have easily figured it out if they wanted to.”

Qantas, naturally, disagrees.

”It’s drawing a very long bow to suggest that we’re responsible for the conduct of third parties, who owned or leased aircraft several transactions after the original date,” a Qantas spokesman says.

”Whenever we sell an aircraft, we carry out extensive due diligence on the buyer and their intended use of the aircraft and include strict, specific clauses in the sale agreement reinforcing the buyer’s obligation to comply with all relevant international export controls and regulations.”

There is no evidence that Qantas is under investigation in the U.S. in connection with the sale of the 747 to Iran, so, apparently, U.S. authorities agree with Qantas.

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Mar

7

No Bling For Norks

Posted by Clif Burns at 8:45 pm on March 7, 2013

Category: North Korea Sanctions

Kim Jong Un Official Photo - Fair Use On the heels of North Korea’s nuclear test, the U.N. agreed today to a new round of sanctions on the rogue state. Those sanctions, however, are mostly incremental and far from comprehensive.

The financial sanctions block the assets of a handful of individuals and entities. They also prohibit North Korean banks from opening new branches in member countries. North Korean banks are forbidden from joint ventures with, or ownership interests in, banks in member states but only if the member state believes that these ventures or interests could contribute to North Korea’s nuclear or missile programs. An absolute prohibition is imposed on bulk cash transfers to North Korea.

New inspection measures are also imposed. Member states are directed to detain and inspect cargo to and from North Korea if there is reason to believe that the cargo contains items prohibited under these new sanctions orÂ previous sanctions. Among the prohibited items added by the new sanctions are perfluorinated lubricants, certain valves useful in uranium enrichment, and control and measurement equipment for wind tunnels.

The new sanctions also include prohibitions of export to North Korea of sodium perchlorate. That chemical is not particularly useful as a propellant because of its tendency to absorb moisture. As such, it is not specifically listed on the Missile Technology Control Regime. However, it is apparently useful as a precusor to ammonium perchlorate, which is more interesting as a propellant and which is listed on the MTCR.

Of course, no sanctions on North Korea would be complete without tossing in prohibitions on a few more luxury goods. The new sanctions clarify that prohibited luxury items include precious and semi-precious stones (such as diamonds, sapphires and rubies), jewelry with pearls, yachts and racing cars.

My guess is that Kim Jong Un decided to threaten the U.S. with a preemptive nuclear attack when he heard that the new sanctions would include pearl necklaces.

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