Syria

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

Invitrogen Corporation agreed to pay a fine of $30,000 after it voluntarily disclosed its 3 illegal exports and one attempted illegal export to Syria of tissue typing trays. These trays are used in the process of organ transplantation. The trays are used to test tissues in both the donor and the receiver to ensure that the donated tissue will not be rejected by the donor.

The company did not obtain the required export license to send the HLA Tissue Typing Trays to Syria. Invitrogen also made false statements to the U.S. Government when it filed Shipper’s Export Declarations stating that the items did not require a license.

More information:

E2006.pdf (PDF)

Tissue Typing (on Healthline)

In late March, 2007, the Department of Treasury released the most current list of countries which require, or may require, cooperation with an international boycott within the meaning of section 999(b)(3) of the Internal Revenue Code of 1986.

The list includes:

• Kuwait
• Lebanon
• Libya
• Qatar
• Saudi Arabia
• Syria
• United Arab Emirates
• Yemen

Republic of Iraq is not on this list but its status is currently under review by the Department of Treasury and it may be added in the future.

Source:

• Federal Register - April 3, 2007 (Volume 72, Number 63, Page 15934)

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

In June of 2005, President Bush issued Executive Order 13382 authorizing significant financial sanctions on WMD proliferators and any firms or individuals who provided support or services to them. Upon its issuance, the President identified eight entities in North Korea, Syria and Iran for their support of WMD proliferation.

Iran’s 5th largest bank, Bank Sepah, was designated for doing business with three of those designated entities: Iran’s AIO (Aerospace Industries Organization) which oversees all of Iran’s missiles programs, the Shahid Hemmat Industries Group (SHIG) which oversees Iran’s ballistic missile program, and the Shahid Bakeri Industries Group (SBIG) which is also involved in the missile program of Iran.

Also designated were Ahmad Derakhshandeh, Bank Sepah’s Chairman and Director, and Bank Sepah International Plc, a subsidiary of Bank Sepah in the UK.

So, you got limited export compliance resources and your probably use only a small part of that pool for compliance with the antiboycott regulations. We can’t get you more resources such as time and money, but we can tell you to focus your antiboycott compliance resources on your business activities that involve these countries:

• Kuwait
• Lebanon
• Libya
• Qatar
• Saudi Arabia
• Syria
• United Arab Emirates
• Republic of Yemen

( Iraq is not on the list at this time but remains under review by the Department of the Treasury.)

On September 26, 2006 , the U.S. Department of the Treasury published a notice in the Federal Register announcing that the above countries may require cooperation with an international boycott according to the Internal Revenue Code of 1986, the Arab League boycott of Israel , the same unsanctioned boycott covered by the Export Administration Regulations antiboycott rules. The Commerce Department has not recently put in writing an acknowledgement that its antiboycott regulations focus only on the Arab boycott of Israel , but informally Commerce Antiboycott officials may be willing to admit that is the case. (Quite a few years ago Commerce published an article in its newsletter “The OEL Insider” that stated that it interprets the EAR antiboycott rules to apply only to the Arab boycott of Israel.)

Earlier this year when OFAC introduced its brand spanking new Syrian Sanctions Regulations, we remarked that they remained theoretical “because no one has actually been designated by OFAC under the SSR.  Until Treasury takes this step, the new regulations have little practical effect.”

Well, three months later and more than a year since President Bush signed the underlying executive order, the US Government chose a couple of big fish when the time came to pick the first targets of the new regulations. They are Rustum Ghazali, Syria’s military intelligence chief for Lebanon, and Ghazi Kanaan, the Syrian interior minister. Kanaan was Ghazali’s predecessor in the Lebanon intelligence job and served in that role for twenty years. Both men are thought by the US to have played a leading role in Syria’s occupation of Lebanon, which ended in May.

Under the SSR, US assets belonging to Ghazali and Kanaan (if they have any) will be frozen and US persons are prohibited from doing business with them.

The Office of Foreign Assets Control (OFAC) unleashed the next salvo in the US Government’s barrage of sanctions directed against Syria when it published the entirely new Syrian Sanctions Regulations (SSR) in the Federal Register on April 5. The new regulations come nearly a year after President Bush issued his Executive Order 13338 (pdf) implementing sanctions against the Syrian regime under the Syria Accountability and Lebanese Sovereignty Restoration Act (SAA), the International Emergency Economic Powers Act (pdf) (IEEPA), and the National Emergencies Act (NEA). The new SSR draw their legal authority specifically from IEEPA, not from SAA (or, as some would more festively prefer to abbreviate it, SALSA.)

OFAC’s new regulations are in addition to last year’s rule from the Bureau of Industry and Security (BIS), which banned nearly all exports and reexports to Syria and revoked existing licenses for the country. The only exceptions to the export prohibition are for food and medicine, as well as shipments eligible under certain provisions of License Exceptions AVS, BAG, GOV, TMP, and TSU.

The new Syrian regs have more in common with those applicable to Slobodan Milosevic’s cronies, narcotics traffickers, and terrorists than the more well known Cuban or Iranian sanctions. They are intended to target specific Syrian individuals, firms or other entities that support terrorists, Syrian meddling in Iraq or Lebanon, or proliferation activity. In theory, these folks would have their property blocked. We say in theory because no one has actually been designated by OFAC under the SSR. Until Treasury takes this step, the new regulations have little practical effect.

As part of the same regulation implementing changes to the MTCR, BIS added four organizations in Syria to the Entity List. This marks the first time Syrian entities have been placed on the list, joining others from China, India, Israel, Pakistan, and Russia.

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Within a matter of weeks the Bush Administration made significant changes to the US export/reexport controls on Libya and Syria. The United States relaxed its controls on Libya and tightened its controls on Syria. The new controls on these countries are relatively straight-forward, despite the fact that these changes are based on a relatively large number of official document (two executive orders from the White House, a new law, several Treasury Department general licenses, and at least two Federal Register notices).

Here are the new licensing requirements and restrictions in a nutshell.

LIBYA

• Items classified as EAR99 under the Export Administration Regulations (EAR) are eligible for export/reexport as No License Required (NLR) to Libya. Items under all specific ECCNs continue to require a license.
• Libya is eligible to receive items under license exceptions TMP, GOV, GFT, TSU, RPL and AVS in limited circumstances.
• There is a somewhat favorable license review policy for exports of low-level computers, civil aircraft and parts, and certain other items t o non-military/police end-users.
• Jurisdiction for exports to Libya is transferred from the Office of Foreign Assets Control to the Bureau of Industry and Security (BIS). (BIS already had jurisdiction over reexports to Libya.
• OFAC dropped its rules that prohibit US persons from being involved in transactions involving Libya. US persons may now enter into new transactions with Libya without OFAC restrictions. OFAC continues to prohibit:
  • US persons involvement in Libyan property and property blocked by US person prior to April 23, 2004; and
  • Certain travel-related activities including carriers of the United States and Libya flying to Libya and the United States, respectively.
• The 10% de minimis level for foreign-made items with US content remains unchanged.
• If you have an OFAC license for Libya, you may continue to use it through its expiration date (May 1, 2005 if the license has no expiration date).

SYRIA

• Everything except food and medicine require a license for Syria-that is, items classified as EAR99 now require a license for export or reexport to Syria. All items that formerly required a license for Syria still require a license.
• BIS revoked all licenses that BIS issued for Syria prior to May 14, 2004.
• The new restrictions (above) do not apply to any items en route to Syria on May 14, 2004 as long as the items are exported or reexported by May 28, 2004.
• You may not use license exceptions for Syria except as follows:
  • TMP only for news media
  • GOV only for US Government
  • TUS only for operation tech data/software, sales tech data, and software updates
  • BAG only in limited cases for personally owned baggage
  • AVS only for temporary sojourn of aircraft reexported to Syria
• BIS policy is to deny all license applications for Syria. Exceptions might be made for deemed exports/reexports, items to support US Government or United Nations activities; medicines and medical devices on the Commerce Control List; aircraft parts to ensure safety of civil aviation; telecomm equipment and associated computers, software and tech data.
• The 10% de minimis level for foreign-made items with US content remains unchanged.
• OFAC did not impose any restrictions on US persons dealing with Syria.

When Did These Changes Happen?

The primary Libya change was announced in a BIS Federal Register notice on April 29 and a general license OFAC announced on its web site on April 23. The Syria change was announced in a May 14, 2004 Federal Register notice.

Why Did the United States Change Its Policies?

Several factors led the United States to significantly relax its controls on Libya: 1) Libya exposed the widespread illicit international nuclear weapons proliferation network and thereby did as much to thwart the future spread of nuclear weapons as any export control regime could ever hope to accomplish; 2) Libya promised that it has ended its weapons of mass destruction program; and 3) Libya accepted a certain responsibility for the bombing of the commercial aircraft over Lockerbie, Scotland and agreed to pay $10 million to the families of the victims.

(Interestingly, a couple of weeks after the United States ended its trade embargo on Libya, Libyan President Gadhafi announced that Libya will halt its military trade with North Korea, Syria and Iran. The White House said that Libya’s actions “have made our country and the world safer.” We have calculated that if the current rate of increasing cooperation and trade policy coordination continues at this pace, by June 17, 2006 Libya will share the same status as Canada under US trade controls!)

As for Syria, the Bush Administration was pressured to impose more trade restrictions on Syria when Congress passed the Syria Accountability and Lebanese Sovereignty Act of 2003. Congress passed the law to punish Syria for its support of international terrorism.

Syria and Libya export controls are under active review at the senior levels of the Bush Administration. As usual, OFAC representatives would not comment on any potential Libya sanctions development other than to say that they are waiting for a White House decision. Based on past experience, the Libya sanctions are likely to be lifted in measured steps over a significant period of time. The first step taken was a lifting of the Libya travel ban on February 25 (for more information see: www.treas.gov/offices/eotffc/ofac/sanctions/libya_gl1.pdf), and an announcement by President Bush encouraging US companies to travel to Libya and prepare themselves for doing business. But the statement seemed more window dressing than sustentative. At least for now, no deals can be closed, as the myriad of sanctions remain, including a total export and reexport ban as well as financial and other transaction restrictions. These sanctions are likely to be rolled back in steps in the coming months, with ECCN: EAR99 license free exports likely to be a first decontrol step.

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Press reports around the globe have been publishing articles about potential sanctions or lifting of sanctions on various countries. Though there has been a lot of sanctions talk these days, as of today there have been few actual changes. As of January 1, 2004, the following is the status of sanctions of key countries listed in reports.

Syria

President Bush recently signed into law legislation that allows the imposition of sanctions (embargo) against Syria. The legislation essentially allows the President to impose an embargo at his discretion should Syria fail to meet certain benchmarks relating to Syrian troops in Lebanon and the Middle East peace process. The President has not imposed these sanctions, so as of this moment, Syrian controls remain as they have been, with non-EAR99 items require export and reexport licenses.

Libya

The US Libya embargo remains in full effect. After the Lockerbie settlement, in which Libya agreed to compensate families of the victims of the aircraft bombings, the UN lifted multilateral sanctions on Libya. However, the US maintained their unilateral sanctions on Libya, with all export from the US requiring licensing from Treasury and all reexports requiring licenses under the Export Administration Regulations. The US maintained unilateral sanctions out of concern for ongoing weapons proliferation programs.

Libya strong man Muammar Qadaffi recently has taken dramatic steps to end these weapons programs and to open the country up to inspectors in an attempt to have the US sanctions lifted. The US is likely to remain cautious in lifting sanctions. Though continued progress may result in an eventual lifting of the embargo, there does not appear to be any immediate movement on the US side to lift sanctions.

Iran

In a Treasury Press release issued on December 31, 2003 (see http://www.treas.gov/press/releases/js1076.htm), the Office of Foreign Assets Controls eased sanctions on Iran for transactions related to humanitarian relief for the earthquake victims in Bam. Contrary to some press reports which indicate a broader easing of sanctions, the changes are actually very limited in scope. They authorize cash donations to NGO’s for the earthquake victims, authorize humanitarian relief activities, and fast track licensing of NGO’s authorizing relief activity in Iran. There is no other movement to lift the embargo on Iran.

As we reported earlier, the US Government seems to be inching closer to placing an embargo on Syria. At this time, Syria remains highly controlled under the Export Administration Regulations, with all items in a classification other than EAR99 requiring an export or reexport license. According to press reports, the House International Relations Committee recently approved the Syria Accountability and Lebanese Sovereignty Restoration Act, mostly due to concerns surrounding Syria’s support of terrorists groups, which Syria of course denies. The bill authorizes the President to impose a ban on all US exports to and US investments in Syria. Current Washington speculation appears to point towards Congress likely passing the Syria sanctions bill before it takes its Fall break.

As we reported earlier, the US Government seems to be inching closer to placing an embargo on Syria. At this time, Syria remains highly controlled under the Export Administration Regulations, with all items in a classification other than EAR99 requiring an export or reexport license. According to press reports, the House International Relations Committee recently approved the Syria Accountability and Lebanese Sovereignty Restoration Act, mostly due to concerns surrounding Syria’s support of terrorists groups, which Syria of course denies.

The bill authorizes the President to impose a ban on all US exports to and US investments in Syria.

Recent terrorist attacks against Israel point towards US imposition of sanctions, but Syria’s support of the recent United States-sponsored United Nations resolution on Iraq may be an effort by Syria to convince Mr. Bush to not impose sanctions, should Congress pass the bill.

Current Washington speculation appears to point towards Congress likely passing the Syria sanctions bill before it takes its Fall break.

The geopolitical events of the past few months have spurred speculation on country export control policy in the Middle East, particularly as related to Iraq and Syria.

At this time, there are feverish reviews underway at the Office of Foreign Assets Controls (OFAC) regarding Iraq sanctions and even new potential Syria sanctions.

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