OFAC

OFAC has released its Quarterly Report of Licensing Activities involving the Trade Sanctions Reform and Export Enhancement Act of 2000. Of the 276 license applications received, 10 were denied, 100 were issued and 26 were amended. The overall average processing time was 67 days, most licenses took 80 days and Return Without Action letters were processed in 18 days.

OFAC claims that the increased complexity and length of the license applications joined with the scrutiny from other reviewing agencies is continuing to affect processing times, especially in this quarter.

The majority of licenses were issued for Iran for medical devices, only 29 of the 276 applications pertained to Sudan products.

The report is available at:

• OFAC Report of Licensing Activities October - December 2007

Engineering Dynamics of Kenner LA has been fined $132,791.39 for export violations. (Editor’s note: I would love somebody to tell me how they came up with the 39 cents. — John Black) The company has been exporting an engineering software program from the US to Iran via Brazil without authorization from the Office of Foreign Assets Control (OFAC) from March 1995 into February 2007 to export the software until the US Department of Treasury discovered the illegal exports.

Over the years the company and its co-conspirators would market, sell, and service the engineering software program to their Iranian clients through another conspirator in Brazil. Engineering Dynamics will not be suspended from export transactions as long as their entire penalty is paid as agreed upon.

More information available at:
BIS - e2044.pdf (PDF)

The US Department of the Treasury’s Office of Foreign Assets Control has posted a summary of civil penalties it recently assessed:

• Mahdavi’s A&A Rug company in Norcross, Georgia remitted $9,240 to settle violations of the Iranian Transactions Regulations. The company allegedly imported goods in violation and did not voluntarily disclose the matter to OFAC
• Morgan Stanely remitted $3162 for violations of the Narcotics Trafficking Sanctions Regulations. He issued instructions to a bank for a wire transfer from a SDNT’s account without an OFAC license.
• United Advantage Federal Credit Union paid $2,970 to settle allegations of violations of the Cuban Assets Control Regulations. The credit union acted without an OFAC license by processing a funds transfer destined to Cuba.
• Good Hope International, Inc. remitted $900 to resolve violations of the Iranian Transactions Regulations. The company used services of an Iranian vessel to transport goods from India to Holland without an OFAC license.
• Four separate individuals paid an amount totaling $4,648 for purchasing Cuban-origin cigars off the internet.

The full report is available at:

• OFAC - 04042008.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)

On October 31, 2007 the Sudanese Sanctions Regulations were amended to partially lift the prohibitions imposed across the country. The blocking and asset freezing of denied entities will remain in effect and unchanged as will the prohibitions involving petroleum and petrochemical industries throughout all of Sudan.

The following areas have been taken off of the prohibited list:

• Southern Sudan, Southern Kordofan/Nuba Mountains State
• Blue Nile State
• Abyei
• Darfur
• 4 official camps for internally displaced persons in Khartoum

This will allow for export/import trade activities involving goods, services and technology to the above mentioned areas without a license. If the transaction involves property or assets held by the government of Sudan or a denied persons, relates to Sudan’s petroleum or petrochemical industry, or involves transshipment through regions of Sudan that are prohibited, a license must be obtained from OFAC.

More information:

OFAC news release

As of October 25, 2007 all U.S. persons are prohibited from engaging in any transactions with Bank Sepah, Bank Mellat, and Bank Saderat and each of the banks’ subsidiaries. Persons holding valid OFAC licenses are also prohibited from exportation or reexportation of agricultural commodities, medicine or medical devices to Iran or Sudan that would directly or indirectly involve the above listed banks.

In January 2007 Bank Sepah and its subsidiary Bank Sepah International PLC were designated pursuant of “Blocking Property of Weapons of Mass Destruction Proliferators and Their Supporters”.

In October 2007 Bank Mellat and its branches and subsidiaries, Mellat Bank SB CJSC, Persia International Bank PLC, Bank Melli, Bank Kargoshaee, Bank Melli Iran Zao, Melli Bank PLC, and Arian Bank were also found pursuant of “Blocking Property of Weapons of Mass Destruction Proliferators and Their Supporters.”

During October 2007 Bank Saderat and its branches were designated pursuant to “Blocking Property and Prohibiting Transactions With Person Who Commit, Threaten to Commit, or Support Terrorism.”

More information:

Executive Order: Blocking Property of Weapons of Mass Destruction Proliferators and Their Supporters

OFAC news release

More Burmese officials have been added to the Specially Designated Nationals list, 23 to be exact, blocking them from any U.S. contact. The list consists of Burmese persons that the US Government has determined have participated in “human rights abuses,” have been engaged in “activities that facilitate public corruption,” have “materially” supported the Government of Burma. The list also includes persons that are “owned or controlled by any blocked person. In fact, even the “spouse or child of” any person who is blocked can be listed too.

President Bush is not backing down either (hmm, that’s a surprise, President Bush isn’t backing down). “So, along the lines in Burma, we have sanctioned individuals within Burma and are considering additional sanctions,” President Bush explained in an interview on the subject. He also made a point of explaining, “[but] sanctions don’t mean anything if we’re the only sanctioner.” Bush made sure as to not give any clues about what is in store for the Burmese Sanctions, possibly there will be even more additions to the Specially Designated Nationals list, or even more bans on exports to Burma; it is hard to tell at this point.

More information available at:

Recent OFAC Actions

Recent OFAC Actions (2)

Executive Order from White House

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.

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

Senator Christopher Dodd introduced a bill to increase the fines for export violations under IEEPA. This bill would increase maximum penalties for violations of EAR and OFAC controls from $50,000 to $250,000, or twice the amount of the transaction; and increase criminal penalties to $1,000,000 with a maximum jail sentence of 20 years. In its present form Dodd’s bill would be retroactive to catch any enforcement action in process on the day the bill is passed. The proposed legislation has not only the support of the Treasury Department, but also been approved by the Senate Banking, Housing and Urban Affairs Committee.

— Hannah Bandalan

Maybe Google Needs a New Export Compliance Consultant or Lawyer

In an effort to highlight the Government of Sudan’s systematic genocide against the “non-Arab” people in Darfur, Google Earth has added information to its internet software which allows internet surfers to view evidence of the horrific acts being committed there. These changes to Google Earth went into effect in early April. At about the same time, Sudanese citizens began to notice that they could no longer download Google Earth from Google’s servers.

The initial speculation was that Sudan’s government had blocked access to Google Earth so that its people would be shielded from the harsh reality of its rule. (We personally didn’t speculate like that because we figured the people being massacred by the Government of Sudan probably already had a good idea of what was going on, and the other people in Sudan (e.g., the people of Southern Sudan) have previously themselves experienced the Government of Sudan’s tactics of using mass killings, burning down entire villages, kidnappings, slavery, rape, and denial of international aid supplies to wipe out groups of people it doesn’t like.)

According to Google spokesperson, Megan Quinn, “in accordance with US export controls and economic sanctions and regulations, we are unable to permit the download of Google Earth in Sudan”.

I disagree with Google’s reading of the Treasury Department Sudan sanctions rules as they apply to the free Google Earth. Treasury normally excludes from its prohibitions “informational materials” which closely resembles the concept of “publicly available” in the Export Administration Regulations. The free Google Earth seems to meet these definitions and be free from Treasury restrictions. Google Earth Plus ($20) and Google Earth Pro ($400) likely are prohibited by Treasury regulations, although an argument could be made that Plus may also be OK.

NOTE: OK, this is just arm chair consulting here. I don’t have all the facts about exactly how Google does business, and, honestly, I haven’t taken the time to research Google.

(And, duh, by the way, did anybody ever stop to think how somebody in Sudan could even have a computer?? Virtually all computers are subject to US jurisdiction, either because they incorporate US components or because they use Microsoft software. US trade controls prohibit all transfers of such computers to Sudan, but, obviously prohibiting the transfers does not necessarily prevent the transfers.)

Now, even if Treasury Department rules did prohibit the download of free Google Earth, anyone with any sort of internet savvy can utilize software tools such as “Tor” that make it impossible for Google’s servers to tell where they are accessing from (unless Google prevents all downloads from Tor), and thus possible to access Google Earth from Sudan.

In any event, if you want to see evidence of the Government of Sudan’s efforts to wipe the “non-Arab” peoples of Darfur, you can get the free Google Earth at earth.google.com and navigate Google Earth to the African continent where you will see a special link “Crisis in Darfur.” If you want to find out more about the atrocities in Darfur, I recommend you get the book Not on Our Watch, the Mission to End Genocide in Darfur and Beyond by Don Cheadle and John Prendergast.

Source:

• Sudan Tribune - April 25, 2007, Author: Stefan Geens

As of December 12, 2006, Great Wall Airlines (aka Changcheng Hangkong) was removed from OFAC’s Specially Designated Nationals list. We reported in August of this year that the airline had been added to the list for “blocking property of weapons of mass destruction proliferators and their supporters”. The parent company, Great Wall Industry Corp. (which was on the list prior to Great Wall Airlines being added) had been suspected of providing assistance to the missile program in Iran. The US decided to act against the airline for this reason. Great Wall Airlines Company reportedly suspended operations three days after being added to the list.

Editor’s Note:

If you didn’t make it to Update 2006, it turns out that the only thing you missed was the posh reception including sushi, crab cakes, and free drinks. You get all of the substance of the presentations here because Scott Gearity wrote a live report from the Commerce Department’s annual Update conference on October 16-17, 2006. Note the time stamp at the beginning of each point below.
–John Black

Read More

On August 16, the Office of Foreign Assets Control reissued a thoroughly revised version of the Burmese Sanctions Regulations. OFAC says the extensive rewrite was needed in order to implement the Burmese Freedom and Democracy Act of 2003. One of the major provisions of the BFDA was to institute a ban on imports from Burma, a measure which remains in effect through today.

The revamped regulations do provide some important (and rather elementary) definitions, such as “exportation or reexportation of financial services to Burma” and “product of Burma”. They also codify a number of exemptions, including some for US citizens and diplomats in Burma and for certain humanitarian and publishing activities, some of which were previously permitted only under general licenses. It is also worth reminding our readers that OFAC’s sanctions on Burma remain somewhat less comprehensive than those applied to Cuba or Iran. For example, while imports and exports of financial services are generally banned, exports of goods and non-financial services are permitted, though exporters should proceed carefully to avoid transactions involving blocked property and the ban on new investment by US persons.

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.