Apr

5

American University in Beirut Dinged by DOJ for SDN Listing in Directory Database

Posted by at 8:59 pm on April 5, 2017
Category: Civil Penalties • OFAC • SDN List

AUB - College Hall by marviikad [CC-BY-SA-2.0 (http://creativecommons.org/licenses/by-sa/2.0)], via Flickr https://flic.kr/p/fLntMv [cropped]The American University in Beirut (the “AUB”) recently agreed to pay $700,000 to settle claims in a civil suit under the False Claims Act brought by the United States. One of the violations alleged was that the AUB, while receiving funds under government contracts with USAID, provided material support to Jihad al-Binaa, an SDN designated under the SDGT program, by “including Jihad al-Binaa in a database that AUB maintained on its public website (the “NGO database”) for the stated purpose of connecting Non-Governmental Organizations (“NGOs”) with students and others interested in assisting them.”

This seems to run contrary to guidance from OFAC that says that the so-called informational materials exception (otherwise known as the Berman Amendment) allows listings in membership directories. In this guidance, issued in 2003, OFAC says this

The listing of basic information on a website in a uniform format for companies around the world, including Iran, by a U.S. person, is not prohibited by the ITR. … You note in your letter that the information being added to the enhanced listings displayed on your website is based on pre-existing information supplied by customers wishing to purchase enhanced advertising from the U.S. Company. The posting of this alternative layout of information on your website regarding companies in Iran, including additional data elements of identifying information, would not be prohibited, as long as the U.S. Company does not provide any marketing services to customers in Iran or substantively enhance information provided by Iranian customers.

The same logic would seem to apply whether the sanctioned party is a resident of Iran or an SDN designated under another program.

There may be, however, some reasons why it might not. Section 594.201(a)(4)(i) prohibits the provision of “financial, material, or technological support” to an entity designated under those regulations. And although section 594.305 of the SDGT regulations contains the standard definition of “informational materials,” that term, oddly, is not used elsewhere in the SDGT regulations and there is not an explicit informational materials exemption as there is, for example, in 560.210(c) of the Iranian Transactions and Sanctions Regulations. This means that there is at least an argument that the provision of informational materials to an SDN designated under the SDGT program might constitute prohibited “financial, material or technological” support to that SDN.

The language of the Berman Amendment, set forth in 50 U.S.C. § 1702(b)(3) prohibits regulation of “importation from any country, or the exportation to any country” of informational materials. Arguably, the prohibition of provision of informational materials to an SDN does not involve the prohibition of the importation or exportation of informational materials.

The better criticism of the government’s case here is whether simply listing an SDN in a database for students is a financial, material or technological support of the SDN. If it is, then one might wonder whether OFAC violates its own regulations by providing a listing, complete with an address and alternate names, in the SDN directory, er, list. Also, one has to wonder about how Facebook gets away with giving Jihad al-Binaa its own page without violating the rule if this kind of activity if “financial, material or technological” support. The answer is simple: providing this sort of information on the Internet is not such support.

Photo Credit: AUB – College Hall by marviikad [CC-BY-SA-2.0 (http://creativecommons.org/licenses/by-sa/2.0)], via Flickr https://flic.kr/p/fLntMv [cropped]. Copyright 2014 marviikad

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Copyright © 2017 Clif Burns. All Rights Reserved.
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Mar

28

Commerce Export Award Winner Fined $27 Million for Export Violations

Posted by at 8:08 pm on March 28, 2017
Category: BIS

Access USA Facebook Page photo via https://www.facebook.com/myuscom/photos/a.10150689214007268.416222.88639537267/10154158962337268/?type=3&theater [Fair Use]

Access USA Shipping, which runs the website MyUS.com, was once the darling of the Commerce Department.  According to the company’s website, the company won that agency’s “President’s ‘E’ Award” for exporters. Do they still get to keep that award after agreeing to pay the Department of Commerce’s Bureau of Industry and Security (“BIS”) a $27 million for 150 export violations?

The allegations contained in the BIS Charging Documents, if true, are pretty harrowing. According to BIS, Access USA changed values and item descriptions in export documents to avoid export scrutiny, describing, for example, guns and weapons parts as “sporting goods accessories,” “fishing tools and spare parts,” or “tailoring tools.” In another case, employees described exported rifle stocks and grips as “toy accessories.” And then, according to BIS, the company had a “personal shopper program” not to help busy executives pick out the best ties or dresses but to have employees pose as the foreign customer, using the employee’s own personal credit cards and home addresses, where the U.S. seller had refused to sell export controlled goods to that foreign customer. There’s plenty more, but you get the gist.

Not surprisingly, the charging documents point out at length that BIS had made “outreach” visits to explain the export laws to Access Shipping. The purpose of these references, apparently, was to bolster the case, as if that were needed, that the company knew what it was doing was on the dark side of the shady line. It strikes me that when guns are described as fishing tools — hey look, it’s a barrel of fish! — you’ve pretty much got the intent issue covered.

This reference to “outreach” visits reinforces the point I’ve made before that these “outreach” visits are not as much made out of the agency’s altruistic desire to educate as they are made to build future cases when the “outreach” victim makes a mistake — although this particular case, admittedly, seems pretty far from an innocent mistake.  Just say no to “outreach” visits.  They will provide less information than sending employees to real training conferences and seminars and will only come back to haunt you.

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Copyright © 2017 Clif Burns. All Rights Reserved.
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Mar

24

About That Laptop Ban

Posted by at 5:31 pm on March 24, 2017
Category: BIS • DDTC

Qatar Airways - Airbus A380 by Glynn Lowe Photoworks [CC-BY-SA-2.0 (http://creativecommons.org/licenses/by-sa/2.0)], via Flickr https://flic.kr/p/mDLaXv [cropped and processed]The United States and the United Kingdom just announced that laptops (and other electronic devices larger than a cellphone) would have to be checked as luggage and could not be carried by passengers into cabins when traveling on non-stop flights from certain destinations in the Middle East and North Africa, including Istanbul, Cairo and Doha, among others. I’m sure that some readers wondered how they were going to work on such flights while another (possibly much larger) group wondered how they would watch “Batman v. Superman” or “Bad Santa 2” during their flights home.

Of course, I wondered whether you would be arrested when you landed if you put in the hold a laptop with export controlled technical data, technology or software. That’s because I’m always looking out for my readers.

The issue, at least as far as BIS is concerned, is whether License Exception TMP or BAG still applies if you separate yourself from the laptop with controlled technology or software at check-in. TMP covers company laptops and BAG will cover personal laptops owned by the passenger.

Under section 740.9(a)(1) of License Exception TMP, items that are exported as “tools of the trade,” which includes software and hardware, “must remain under the “effective control” of the exporter or the exporter’s employee.” I would take this to mean that if the laptop or software on it is controlled for the destination from which the employee is returning, it may not be checked. This is somewhat odd since that same provision allows that laptop and software to be shipped “unaccompanied” within one month prior to the employee’s arrival in the foreign country.

On the other hand,  TMP does not impose the “effective control” on technology on a laptop that would require a license for the traveler’s destination. Instead, section 740.9(a)(3) speaks only of access controls such as a password for the device on which the technology is controlled.

License Exception BAG, under section 740.14(c)(1), only applies to items “owned by the individuals (or by members of their immediate families) … on the dates they depart from the United States.” So this exception would only apply to personally-owned laptops and personally-owned software if they are controlled to the traveler’s destination. Oddly, license exception BAG does not have the “effective control” limitation, so personal laptops could be checked consistently with the license exception even with EAR-controlled software. Additionally, BAG permits export of technology on the laptop, in the hold or the cabin, if there are access controls such as a password.

The ITAR deals with this travel issue in section 125.4(b)(9). As with EAR-controlled technical data, a laptop with ITAR-controlled technical data can be checked and stored in the hold as long as the laptop is protected with a password.

So, the only real issue prohibition under the ITAR or EAR against checking a laptop is when the laptop is not the personal property of the traveler and it contains software that is controlled under the EAR to the traveler’s destination. If there is ITAR-controlled technical data or EAR-controlled technology, a password on the device is sufficient.

Pardon me for a little skepticism here but it seems to me that this electronics ban has more to do with limiting foreign carrier competition in the United States than it does security. To begin with, it covers devices such as Kindles and cameras that are not much different from the size of a cellphone and which certainly do not seem to be more efficient threat vectors. More significantly, a person bent on terror using one of these devices merely needs to change his flight plan to include a stopover (where he won’t be screened again) before continuing to the United States — which is exactly what most travelers will do to avoid being separated from their expensive electronics.

Photo Credit: Mojito by Sami Keinänen [CC-BY-SA-2.0 (http://creativecommons.org/licenses/by-sa/2.0)], via Flickr https://flic.kr/p/4GyGSs [cropped]. Copyright 20xx Sami Keinanen

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Copyright © 2017 Clif Burns. All Rights Reserved.
(No republication, syndication or use permitted without my consent.)


Mar

17

Chocolate Bunnies, Marshmallow Peeps and an Easter Surprise from BIS

Posted by at 11:12 am on March 17, 2017
Category: BIS • China • Hong Kong

Hong Kong International Commerce Center by Bernard Spragg [CC-BY-SA-2.0 (http://creativecommons.org/licenses/by-sa/2.0)], via Flickr https://flic.kr/p/q9tJLV [cropped]The Bureau of Industry and Security is playing Easter Bunny and has left a little Easter egg in the Easter baskets of anyone planning to export certain items to Hong Kong beginning April 19, or two days after Easter Sunday. The Easter egg, er, new rule provides that any export to Hong Kong of an item controlled for NS, MT, NP Column 1, or CB reasons needs an import license from Hong Kong or a statement from Hong Kong that a license is not necessary. These items are not required as part of the BIS license application but must be in the U.S. exporter’s possession before the export is made.

The reason that U.S. exporters need to babysit the compliance by Hong Kong authorities with their own import rules is far from clear. The stated reason for this new rule in the Federal Register notice does not make much sense:

BIS is taking this action to provide greater assurance that U.S. origin items that are subject to the multilateral control regimes noted above will be properly authorized by the United States to their final destination, even when those items first pass through Hong Kong.

Okay, that is what the BIS is licensing process is for and these documents are not even required when applying for the license. So that rationale is, well, not very compelling.

BIS has also published FAQs on the new requirement. These make clear that the requisite documents must be obtained from Hong Kong even if the export is being made pursuant to a license exception.

Who says there are never any surprises in their Easter baskets, just the same old dyed eggs and chocolate bunnies?

Photo Credit: Hong Kong International Commerce Center by Bernard Spragg [CC-BY-SA-2.0 (http://creativecommons.org/licenses/by-sa/2.0)], via Flickr https://flic.kr/p/q9tJLV [cropped]. Copyright 2014 Bernard Spragg

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Copyright © 2017 Clif Burns. All Rights Reserved.
(No republication, syndication or use permitted without my consent.)


Mar

15

Word of the Day: Peloteros

Posted by at 6:04 pm on March 15, 2017
Category: Baseball • Cuba Sanctions • OFAC

Cuba Baseball Stamp [Fair Use]It’s time for our annual Cuba baseball post which each year has been motivated by cold weather, spring training, and anxious anticipation of opening day. And what better subject for this post than the recently concluded trial in Miami in which Bartolo Hernandez, a baseball agent, and Julio Estrada, a baseball trainer, were accused of smuggling Cuban players into the United States and which featured testimony by one of these peleteros about how he ate his fake Haitian passport on his plane trip to the United States. (Insert optional better-than-airline-food joke here.)

One of the key elements of the case is section 515.505 of the Cuban Assets Control Regulation which unblocks Cuban nationals after they have established residency in a country outside Cuba other than the United States. The other element is that an unblocked Cuban in a third country is, under Major League Baseball’s rules, a “free agent” that can negotiate higher salaries; Cubans who come directly to the United States and become unblocked by seeking permanent residence here are eligible to be signed to an MLB team only through the amateur draft system and will not be able to command the astronomical salaries of a free agent.

According to prosecutors, the defendants smuggled the Cubans into third countries and then forged documents that could be used to evidence residency in those countries. The payoff to the defendants was the high commissions (allegedly around $150 million) that they received on the salaries of their free agent clients. The defense claimed that the two defendants did not forge documents and were unaware that the players, desperate to get to the United States, were using forged documents. The jury, however, convicted both men earlier today.

In other baseball news, opening day for the Chicago Cubs is Sunday, April 2, in St. Louis, a town that even the Rams had the good sense to escape.  Go Cubs Go!

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Copyright © 2017 Clif Burns. All Rights Reserved.
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