ExportLawBlog

Apr

10

Iran Fights Back (Or Not?)

Posted by Clif Burns at 6:30 pm on April 10, 2012

The Internet in Iran This blog reported on March 29 that OFAC had provided guidance on various technologies eligible for export to Iran as incidental to the exchange of personal communication over the Internet. Most significantly, OFAC indicated a willingness to permit certain fee-based services, such as Skype and Google Voice, to Iranians under this exception. I had suggested that given comprehensive sanctions on major Iranian banks, ordinary Iranian citizens would be hard-pressed to actually pay for these services even if licensed.

Now it appears that Iran might even more effectively prohibit U.S. exports of services and software incidental to personal communications over the Internet. According to this story in Ars Technica, the Iranian government is planning to create a national intranet and cut off access to the Internet for ordinary citizens in Iran, possibly as early as October 2012. The source for this story is a report by Reporters Without Borders entitled Enemies of the Internet

After a number of other outlets picked up the story, Iran is now claiming, somewhat bizarrely, that the story of shutting down the Internet in Iran is an April Fool’s day hoax. Seriously, I guess the mullahs sat around and decided it would be hilarious to tell a whopper about the Internet on April Fool’s day. I think the only April Fool is anyone who actually believes the story that the report was an April Fool’s day joke. Iran’s history of pervasive Internet censorship is well detailed in the Reporters Without Borders report, so the idea of a “clean” national intranet in Iran to replace the real Internet hardly strains credibility.

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Copyright © 2012 Clif Burns. All Rights Reserved.
(No republication, syndication or use permitted without my consent.)

Apr

4

Seized Weapons “Contraband” Despite Arms Export Act Charges Dismissal

Posted by Clif Burns at 6:56 pm on April 4, 2012

Customs Destroys Seized Merchandise A memorandum opinion of the Ninth Circuit, filed on March 30, 2012, reaches a somewhat paradoxical conclusion. It held that a party that had been indicted for violations of the Arms Export Control Act had no right, even though the indictment was dismissed, for compensation resulting from the destruction of the seized merchandise by U.S. Customs. The merchandise in question consisted of weapons parts imported from Vietnam in violation of the U.S. arms embargo against Vietnam. The opinion pointed out that the goods were still contraband because the claimant did not have a license from ATF required for permanent imports or a license from the Department of State required for temporary imports.

Of course, the back story — why were the indictments dismissed for the illegal arms import? — is the most interesting part of this story and can be found in the district court opinion dismissing the arms charges. The charges in question were dismissed because the court found that the defendant (and claimant) had been denied his Sixth Amendment right to a speedy trial. That happened because — get this — U.S. Customs destroyed the central evidence in the case, the seized weapons parts, because it was costing too much to store them. Repeated calls by Customs to the AUSA prosecuting the case weren’t returned and so Customs simply torched the goods. The prosecution was somewhat loathe to reveal this blunder to the defense and so it kept dawdling on complying with the defendant’s discovery request. Interestingly, the district court held that the destruction of the evidence, although that constituted “gross negligence” by the government, did not violate the defendant’s rights under the Due Process Clause because the evidence was not exculpatory.

My favorite part of the district court decision is this little nugget explaining how the evidence wound up being destroyed:

SA Bench followed SA King’s suggestion and made several telephone calls to AUSA Schaeffer at the San Francisco United States Attorney’s Office, leaving voicemail messages, asking for return calls, and stating that unless he (Schaefer) authorized continued retention of the evidence, [Customs] would destroy it. At SA Bench’s request, his Group Supervisor Jerry Barnett also called one or two times and left the same voicemail messages for AUSA Schaefer. â€¦ AUSA Schaefer testified that he never received the voicemail messages, that he always returned his telephone calls and that he had no information that the weapons parts were in jeopardy of being destroyed. Numerous present and former government employees, however, testified that Schaefer had an extremely poor reputation for returning phone calls. SA Bench did not receive any return call from AUSA Schaefer and Bench advised Ms. Mower in July of 1999 that the evidence could be destroyed, which occurred on September 28, 1999. â€¦

AUSA Schaefer had a reputation among law enforcement agents, defense attorneys and members of the United States Attorney’s Office in San Francisco, for extreme dereliction regarding returning telephone calls. SA Stoltz testified that when he wanted to contact Schaefer, it would typically require 50-60 calls and voicemail messages

[Record citations omitted.]

The amazing thing here is that someone would actually leave 50-60 messages in such a situation. I think that’s often referred to as the triumph of hope over experience.

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Copyright © 2012 Clif Burns. All Rights Reserved.
(No republication, syndication or use permitted without my consent.)

Apr

3

Piling On

Posted by Clif Burns at 8:15 pm on April 3, 2012

Category: BIS

Piling On Back when the Bureau of Industry and Security (“BIS”) was begging Congress to give it authority to increase the amount of penalties it could impose, it said that higher penalties would avoid the need for creative charging letters which allege that a single action constitutes four, five, six or more separate violations. For a while, BIS seemed to stick to its word after Congress essentially gave BIS the power to fine exporters in amounts equal to the gross domestic products of certain small countries.

But good intentions, like party balloons, are ephemeral. Look at the settlement documents recently released by BIS pursuant to which Dresser, Inc. agreed to pay $88,000 to settle charges of export violations. In that charging letter, BIS resurrects from its deserved grave the old practice, thought to be forsworn, of adding a separate count for an S.E.D. violation to each and every export count. The first ten counts allege export of control valves classified as ECCN 2B350 without a license. The next 10 counts are for S.E.D. violations for each of the ten preceding export violations. For nine of the ten S.E.D. violations, the only alleged misstatement was “N.L.R.,” or “No License Required” when in fact licenses were required. Of course, every export violation where an S.E.D. is required and the exporter fails to get a license will necessarily involve this same S.E.D. violation, effectively increasing the maximum penalty for export violations from $250,000 to $500,000.

One of the charged S.E.D. violations also involves an alleged failure by the company to state the correct ECCN on the S.E.D. It’s not entirely clear what ECCN was listed. If the incorrect ECCN charged was EAR99, then this will necessarily occur with every export violation. It also seems likely that the other nine S.E.Ds showed EAR99 as the ECCN, making it unclear as to why just one instance of this was singled out.

Also puzzling here was why BIS engaged in this piling on of charges where the ultimate penalty was $88,000 and didn’t require these charging gymnastics. Where the exporter has purposefully given a false description of the item exported in order to export it without a license, I can see some justification for adding an S.E.D. charge. But there is absolutely nothing in this case to suggest that the S.E.D.s called the exported items anything but what they were: control valves.

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Copyright © 2012 Clif Burns. All Rights Reserved.
(No republication, syndication or use permitted without my consent.)

Mar

29

I Think This Is What You Call Cold Comfort

Posted by Clif Burns at 8:37 pm on March 29, 2012

Category: Iran Sanctions • OFAC

The Internet in Iran Last week, the Office of Foreign Assets Control (“OFAC”) issued an interpretative guidance on section 560.545 of the Iranian Transactions Regulations which permits exports from the United States to Iran of services incidental to the exchange of personal information over the Internet. The rule requires that such services be “publicly available at no cost to the user.” The guidance gives some examples that seem to have been obviously covered even without the guidance:

Personal Communications (e.g., Yahoo Messenger, Google Talk, Microsoft Live, Skype (non-fee based))

Updates to Personal Communications Software Personal Data Storage (e.g., Dropbox)

Browsers/Updates (e.g., Google Chrome, Firefox, Internet Explorer)

Plug-ins (e.g., Flashplayer, Shockwave, Java)

Document Readers (e.g., Acrobat Readers)

Free Mobile Apps Related to Personal Communications

RSS Feed Readers and Aggregators (e.g., Google Feed Burner)

More significant is what the guidance has to say about paid services which aren’t covered by section 560.545. According to the guidance, fee-based personal communications are now covered by the favorable licensing policy set forth in the Statement of Licensing Policy On Support of Democracy and Human Rights in Iran. Specifically, this favorable policy will cover paid web hosting services, paid mobile apps and paid internet communications services such as Skype and Google Voice. The policy also covers payment to Iranians in connection with online advertising on Iranian websites.

This all laudable, but it seems unlikely that anyone will be able to take advantage of these new policies. Specifically, how are Iranians going to pay for these services without routing them through one of the many designated Iranian banks? All such payments will wind up being blocked. Even if the payments are somehow routed only through the few banks that are not designated, it’s not clear how the transfers from individual Iranians will be able to reference the specific licenses to avoid being rejected by U.S. banks.

So although Iranians might find some comfort in OFAC’s lip service on democracy in Iraq, it will be cold comfort if they actually try to obtain the paid services in question.

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Mar

27

Some Dilemmas Above My Pay Grade

Posted by Clif Burns at 6:14 pm on March 27, 2012

Category: Iran Sanctions • OFAC

A number of news reports, like this one, indicate that MV Eglantine was hijacked by Somali pirates yesterday near the Maldives and about 460 nautical miles west south west of India’s Cape Comorin. The scene of the hijacking was 1,800 miles from Somalia. Twenty-three crew members were on board.

Regular readers might recognize the name of this ship because it is one of the Iranian vessels on the Office of Foreign Assets Control’s list of Specially Designated Nationals and Blocked Persons. This leads to a number of interesting questions. Will OFAC send a charging letter to the pirates accusing them of engaging in illegal transactions with a blocked vessel? Or should it send the pirates a thank you note for more effectively blocking the ship than OFAC has so far managed to do?

Another news report says this:

US Naval forces have said they will attempt aid and rescue just as if it were any other flagged ship, Iranian or not.

Doesn’t the U.S. Navy need a license from OFAC to provide rescue services to the Iranian crew members and shipping company? Will OFAC send the Navy a charging letter if it rescues the crew without an OFAC license? Will the Navy have to block the ship once it rescues it?

Of course, these are all rhetorical questions. Even so, one must wonder how we ever expect our sanctions to deter Iran’s nuclear ambitions if we let our Navy rescue their ships every time they get in a tight spot. A few unrescued Somali hijackings and I’m sure Iran would just throw in the towel and turn their nuclear facilities over to us.

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