Cuba

BIS has revised a license exception in the Export Administration Regulations which will allow individuals to export mobile phones as gifts to eligible recipients in Cuba. The change was brought about because BIS feels that this will provide support for individuals to sustain democracy-building efforts for Cuba by allowing Cuban citizens to have contact with persons in other countries. The president announced that this will support, “Cubans who work to make their nation democratic and prosperous and just.”

The terms of License Exception Gift Parcels and Humanitarian Donations (GFT) will now allow mobile phones and related software, batteries, memory cards, chargers, and other accessories for mobile phones to be included under gift parcels. The value on gift parcels has also increased from $200 to $400; this will allow donors to still send medicines and medical supplies along with the mobile phone and accessories without having to make any reductions in the quantities of other supplies in the gift parcel. Read More

The Department of State has issued to Congress that Cuba, Eritrea, Iran, North Korea, Syria, and Venezuela are not fully cooperating with the United States antiterrorism efforts. John D. Negroponte, Deputy Secretary of State has issued the decision to retain the certification of North Korea pursuant to Section 40A of the Arms Export Control Act.

There will be an ongoing review of the designation of North Korea and the outcome of the review may warrant a new assessment and possible change in certification.

More information:

• Federal Register Notice

Kabba & Amir Investments, Inc., d.b.a. International Freight Forwarders (IFF) of Canada have been fined $6,000 for export violations. The company is a freight forwarding company. In June 2000, IFF took possession of shipment of X-Ray Film Processors, items subject to the Regulations, and exported them to Cuba without a license.

The company worked with known and unknown co- conspirators to export the processors to Cuba via Canada without obtaining a BIS export license. IFF violated the regulations when they took possession of the items in the United States and took them to Canada.

After several reviews, and IFF claiming that they were unaware that a license was necessary, BIS found that they do not have to prove that the company knew or did know that they needed a license. As long as IFF pays their fine within 30 days of their final charging letter they will not be denied export privileges, if they do not, their export privileges will be denied for three years.

More information:

• efoia.bis.doc.gov/exportcontrolviolations/e2045.pdf (PDF)

The Department of Treasury’s Office of Foreign Assets Control has issued a guidance document to give much need direction banks, importers, and exporters regarding blocked property and interests in blocked property. The main issue the OFAC is attempting to answer in this document is, what if a company is not on the SDN list, but one of its partners/ shareholders/ members is? Can we do business with the company? The answer is not so clear however, it actually is that it depends. If the SDN lists any partners/ shareholders/ members who have 50% or more interest in the company than the answer is no, but if they only have 49% or less interest in the company than you can in fact do business with the company but you should act with strong caution.

This all may sound a bit clear until the fact arises of how to actually find out if the SDN has 50% or greater interest therein the company. The OFAC does not give any opinions or options to generate an answer for this problem. If in fact a company fails to detect a SDN interest in 50% or more in one of their customers and ends up engaging in business the company will be treated by the OFAC as if they dealt with an SDN directly.

OFAC warns and reminds companies, “In certain OFAC sanctions programs (e.g., Cuba and Sudan), there is a broader category of entities whose property and interests in property are blocked based on, for example, ownership or control.”

More information:
OFAC Guidance Document (PDF)

In the August 30, 2007 Federal Register, the Office of Foreign Assets Control (OFAC) made several amendments to the Cuban Assets Control Regulations, Burmese Sanctions Regulations, Sudanese Sanctions Regulations, and Iranian Transactions Regulations to extend the general licensing to cover services in connection with written publications. A key element of the amendments applies to electronic publications that are already exempt from OFAC jurisdiction. The amendments extend the exemption for informational materials to also apply to embedded software that is embedded in the informational materials and used to search, view or read the electronic publications.

According to reports from the Miami Herald and elsewhere, well-known internet travel company Travelocity paid $183,000 fine for illegally booking approximately 1,400 Cuba trips between 1998 and 2004. (FYI, that comes to $130 per trip. The US trade embargo on Cuba prohibits US companies and their foreign subsidiaries from being involved with transactions that involve Cuba.

(OK, if you just went to www.travelocity.com to get a thrill from doing a test to see if you could book a flight to Cuba, you are an export control nerd.)

So you’re up after 11PM one night, watching Jay Leno on the Tonight Show for a little comic relief after a long day of trying to enhance export compliance in your company. The next thing you know, there is some guy talking to Jay about the US embargo on Cuba and the Office of Foreign Assets Control. First, you think you’re dreaming, just another one of those frequent export compliance nightmares you get after too many years of reading the ITAR and avoiding OFAC facilitation.

But, no, this time you are not having a nightmare. Michael Moore did really complain to Jay Leno that federal officials were going to issue a subpoena to get more information to pursue their case against him for his trip to Cuba to film part of the movie “Sicko.”

According to a Reuters report, Moore’s attorney David Boies has been contacted by a US Department of Commerce division regarding the name of the person who would be accepting the subpoena on Mr. Moore’s behalf.

US Officials May Subpoena Filmmaker Moore
Reuters: July 27, 2007

In March 2007, controversial director Michael Moore filmed his latest documentary “Sicko” in Havana, Cuba. The film is about failures of the US healthcare system and features “9/11 first responders” being examined in Cuban health care systems. All the 9/11 workers that traveled with Moore were experiencing health problems because of the toxic Ground Zero conditions.

The Office of Foreign Assets Control (OFAC) is now investigating to determine whether Moore’s trip violates US law. On May 2, OFAC sent out a letter to Moore informing him of the investigation and the allegations against him. Although OFAC admits to Moore applying for permission to go to Cuba, OFAC is accusing the director of going before any determination had been made or any license had been issued. The letter sent to Moore demanded a very detailed report about his trip to Cuba which will determine whether he qualifies as a full-time journalist and can therefore qualify for a general license. Moore wrote a letter in response to OFAC and ultimately requested they end the investigation and concentrate, instead, on 9/11 heroes in need. It seems unlikely that OFAC will initiate an investigation of the needs of 9/11 heroes as enforcing US trade embargoes keeps it busy enough.

Moore was also attacked in the National Review by Law & Order star and former senator, Fred Thompson. Moore responds again, by letter, telling Thompson that he is in no position to criticize Moore’s trip to Cuba and notes Thompson’s fondness for Cuban cigars and eventually challenging this former Tennessee Senator to a one-on-one debate concerning health care. Thompson declined the debate and hinted that Moore should look into a mental facility.

Who would have thought it? All the good fish are in Cuban waters.

Lethal Weapon Charters, Inc. and owner, Ted Baier (Key West, FL) will pay $17,000 in fines for taking their charter boat, the “Lethal Weapon” into Cuban waters on charter fishing expeditions on two occasions. The company and Mr. Baier were charged with exporting a vessel without the required license and with acting with knowledge of a violation. Baier had signed a Coast Guard document acknowledging that he knew that a license was required to sail into Cuban waters.

Baier and Lethal Weapon Charters, Inc. will pay a combined $17,000 to settle the charges with an additional $17,000 suspended on the condition that no further violations are committed during the suspension period of one year.

As Clif Burns wonders in his April 30, 2007 Export Law Blog, is the BIS really spending it’s time well in prosecuting cases of this type? The regulations are created in order to deprive the Cuban government of revenue generated by the U.S. Fishing in Cuban waters will, if anything, take money away from Castro.

Sources:

• One That Should Have Gotten Away - ExportLawBlog, April 30, 2007, Author: Clif Burns
• BIS Settles Export Control Case against Lethal Weapon Charters, Inc. and Ted Baier -
  The Daily Bugle, April 4, 2007, Author: Gary L. Stanley

Successor Liability Update

LogicaCMG, successor to CMG Telecommunications, Inc., was been charged for violating the International Emergency Economic Powers Act for illegal exports to Cuba. In August 2001, LogicaCMG’s predecessor, CMG, illegally exported a computer server to Cuba. The computer server was shipped from CMG in Nashua, New Hampshire to a customer in Panama and then knowingly was shipped to a user in Cuba.

LogicaCMG pleaded guilty to the charges on April 25, 2007 and agreed to pay the maximum fine of $50,000. The company also made agreements to pay civil penalties associated with causing the server to be illegally exported to Cuba.

Canadian Citizens May Seek Relief via Canadian Legal System

According to media reports, the fallout continues from conflict between tight United States ITAR requirements and Canadian defense manufacturers. US regulations prohibit Canadian citizens who have dual citizenship in a country listed in ITAR 126.1 from working on US defense projects. There are currently 19 countries whose citizens are banned from this type of work including China, Cuba, Lebanon, Syria, North Korea, Belarus, Afghanistan and Rwanda. Recently Venezuela was added to this list, which may have contributed to the termination of an employee at Montreal’s Bell Helicopter facility.

Bell Helicopter is currently working on an $849 million contract for the US Military and has had to reassign 24 employees to stay in compliance with the US regulations on who can work on their defense projects.

Jaime Vargas, a Canadian citizen with dual citizenship in Venezuela, had only worked at Bell Helicopter for several weeks when he was unexpectedly terminated. There are conflicting stories from Mr. Vargas and Bell representatives on the quality of work performed by the employee. Though Bell claims that he had performed poorly, Mr. Vargas states that he had had nothing but positive reviews and had recently been congratulated by his supervisor on the high quality of his work.

The Canadian Centre for Research-Action on Race Relations says that it will be filing a civil suit on Mr. Vargas’ behalf stating that they believe he was terminated solely based on his connection with Venezuela. They will ask for $110,000 in compensation for Mr. Vargas. The suit will be based on allegations that the termination violated Canadian Human Rights laws.

John Black’s Note: I hope Mr. Vargas wins the suit. I seriously doubt that DDTC will want to revise the ITAR if that happens, but I love it when DDTC digs in its heels and refuses to bend its policies to take into account issues outside of its own control. I look forward to the eloquent statement of the DDTC position, “We don’t care if you win a law suit, we don’t care if the ITAR causes good Canadian companies to violation Canadian laws, we aren’t changing the ITAR.”

Source: “Canoe Network Money” February 6, 2007

Full story on Canoe Network

The Department of the Treasury Office of Foreign Assets Control announced on November 6, 2006 that an unnamed individual had agreed to pay $967.00 to settle charges of buying Cuban cigars for sale on the internet.

The Cuban Assets Control Regulations prohibit imports of Cuba origin items into the United States .  CACR also prohibit persons subject to US jurisdiction from receiving or purchasing Cuban origin goods (“property of Cuban origin”)  anywhere in the world.

On a recent Caribbean cruise I couldn’t help that in the ports we visited, many of the gift shops were hawking Cuban cigars.  It seemed to me that some of the tourists, including possibly even a few unknowing, or perhaps unsavory, Americans were purchasing these illegal smokes.  Luckily, yours truly is an expert on the CACR and knew better than to prop up the Castro regime by violating the CACR.  OK, then I noticed that each evening on the cruise ship there was an organized cigar smokers get together, where, no doubt, there may have been a few unpatriotic Americans demonstrating their support for the Castro regime by smoking their Cuban contraband.  It struck me immediately, that perhaps it would be a public service if I would go up to the cigar smoker’s meeting and explain to them the CACR prohibitions against receiving goods of Cuban origin.

Fortunately, for me, at the last minute I cancelled my plans to deliver my impromptu CACR seminar out of fear that if I inhaled any of the smoke from the Cuban cigars I too would be receiving goods of Cuban origin, or at least by-products of Cuban origin goods.

E. & J. Gallo Winery recently disclosed business travel-related transactions in Cuba and paid a $3750 settlement with the Office of Foreign Assets Control, as reported in OFAC’s April civil penalties publication (xls).

Cuba isn’t exactly known for its wine, but according to this article, Gallo is among the US firms seeking to sell in Cuba under the provisions of the Trade Sanctions Reform and Export Enhancement Act (TSRA).  BIS implemented TSRA in part by creating License Exception AGR, which permits US companies to export to Cuba agricultural commodities (pdf) on a cash basis.

But TSRA did not authorize travel-related transactions in Cuba on the part of those US exporters.  So it seems that upon hearing that Cuba was now a legitimate market in the eyes of the federal government, Gallo may have rushed into Cuba without realizing that while selling the wine was no longer a problem paying for a hotel room in Havana or paying the cab driver still was one, at least without a specific license.

There is legislation pending right now in a House committee that would change this by requiring OFAC to issue a general license authorizing travel-related transactions incident to activities permitted under TSRA — H.R. 719, the Agricultural Export Facilitation Act, sponsored by Rep. Jerry Moran (R-KS).

The media has widely reported the debates in the US Congress and among Bush Administration officials regarding lifting US sanctions on Cuba. All of the talk likely will not lead to any tangible changes for any company other than those in agriculture and medical supplies. President Bush has stated his strong support for the status quo in the US embargo on Cuba. President Bush has not stated how his support for the embargo is important to his brother’s political future in Florida, where support for ending the embargo is political suicide.

On the Iraq front, the United Nations Security Council revamped its sanctions against Iraq under the “Oil-for-Food” program (or programme, if you prefer). The new sanctions are intended to allow commerical products without military implication to flow into Iraq while retaining strict controls on any product with military applications. The United Nations has published a “Goods Review List” that identifies items that will not be allowed into Iraq. To see the latest version of the Goods Review List go to www.un.org/depts/oip. If you want to print a hard copy, first make sure there are at least 300 sheets of paper in your printer.

It appears that actual implementation of the new program will not happen until July (2002) at the earliest.

While the United States Government has been slow to advise its exporters and foreign reexporters regarding the new UN sanctions, other governments, most notably the UK Department of Trade and Industry have attempted to give their exporters some guidance—See www.dti.gov.uk/export.control.

The bottom line: If your export or reexport transaction requires a US license of any sort, don’t expect to see big changes in US license approval policy.

The Office of Foreign Assets Control of the Treasury Department is cracking down on illegal US travel to Cuba. OFAC’s regulations has strict limits on the amount of money US citizens and residents may spend while in Cuba. Acting under the orders of President Bush, OFAC has fined many US travelers for their illegal spending in Cuba, including a man who went to spread his parents’ ashes at a church they founded in Cuba. At the other end of the sympathy spectrum, former Heavyweight Boxing Champion Mike Tyson may be facing OFAC sanctions for his recent visit to Cuba.