Export regulation news, analysis and commentary
OFAC has posted guidance and legal sources pertaining to Iraq Sanctions on their website. These sanctions apply to all US persons, companies, non- profit groups, and government agencies, simply put EVERYONE.
The site offers guidance by offering copies of applications for the Release of Blocked Funds and general licenses. Several Adobe PDF documents can be found under “Interpretive Guidance” which offers a little more insight for the savvy.
Who would have ever thought: export controls in Mother Jones? Here is a summary of what Mother Jones had to say:
The latest statistics on US arms sales to Iran is beginning to raise a lot of eyebrows and questions. Investigators at the US bureau of Immigration and Customs Enforcement (ICE) have some answers to the numerous questions but even the answers seem to raise even more questions.
We are told by the Department of Homeland Security that dealers around the world are recruiting US military and intelligence officials to assist them in exporting restricted military commodities to neutral third countries-when they know the final destination will be a sanctioned country, such as Iran.
Last year The Justice Department appointed Steven W. Pelak to serve as the first-ever National Export Control Coordinator. The position was created as a stepping stone for getting a hold of the export problem at hand. In essence, Pelak will be a US attorney that will only try US export cases. Read More
The Associated Press recently outlined seven years of US government trade data and announced that the value of US exports to Iran has rose from close to $8 million in 2001 to nearly $150 million last year. Despite the only exceptions for exports being agricultural, medical and humanitarian it seems that cigarettes, bull semen, bras, golf carts, fur clothing, sculptures, perfume and musical instruments all fall under “humanitarian” exceptions.
What’s worse is that the sanctions we put on Iran are suppose to irritate their military efforts, but somehow they have received at least $13,000 in “aircraft launching gear and/or deck arrestors”. Although this seems like a small amount, it actually is far from it. Older military items are often sold for near pennies. Before Bush signed legislation prohibiting the Pentagon from selling leftover F-14 parts, they would sell the parts that once costs the US roughly $38 million, and would now sell them for around $2,000 to $4,000 to domestic buyers. Read More
The President lifted the TWEA (Trading With Enemy Act) Sanctions on North Korea on June 27, 2008 after North Korea gave Chinese officials in Beijing 60 pages of documentation of its nuclear past after continued negotiations. Unfortunately for exporters and reexporters, the full scope of US export and reexport controls remain in force.
The document declares far less nuclear weaponry than the country actually houses, but Bush felt that North Korea should be rewarded for its efforts, as this is seen as a positive step in negotiations for the future of denuclearization of the Korean peninsula.
North Korea will be taken off the State Department list of nations that sponsor terrorism, but all other sanctions will remain in place. This means that all property and interests in property that were blocked are still blocked and will remain blocked. All current restrictions on imports, exports and North Korean blocked funds held by US financial institutions will continue indefinitely. The restrictions will continue until North Korea cooperates completely and gives up all of its nuclear weapons and information.
So, in a nutshell, in terms of export and reexport controls. nothing has changed, except the fact that North Korea is no longer on the list of State Sponsors of Terrorism. All prior restrictions apply, even though, “[North Korea] is no longer in the national interest of the United States.”
More information:
The US Department of State, Directorate of Defense Trade Controls (DDTC) amended the International Traffic in Arms Regulations to add Sri Lanka to the list of prohibited countries. Effective March 24, 2008, DDTC will not approve any licenses or agreements for Sri Lanka. There will be a possibility that licenses may be issued for technical data or equipment for maritime or air surveillance and communications, but only after a case-by-case review by DDTC.
Importantly, this means that exemptions may not be used for Sri Lanka.
But, of course you can use the ITAR 123.17 exemption to carry three guns and a thousand rounds of ammo with you if you travel to Sri Lanka, or to any other ITAR 126.1 country for that matter. You gotta love the 123.17 availability so that Americans can be fully armed when they take a vacation to Venezuela or Belarus. No sir, you can’t use the temporary import exemption in ITAR 123.4 to fix a broken military radio, but you can be packing heat when you go to see Panduwasnuwara in Sri Lanka. Only in America would we require an export license for a company to send some spare parts to the US Army fighting a war in Iraq but let me carry a thousand rounds of ammo and 3 guns on my family vacation to Costa Rica.
More information:
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)
Two Louisiana men have been indicted after officials claimed that their company, Engineering Dynamics, Inc., sold CAD software to companies in Iran. They did not actually directly sell the software to Iran, but sold the software to a distributor in Brazil who then sold the software to companies in Iran.
The indictment is based on sales by the foreign distributor and most of the allegations relate to communications from the Brazilian distributor to Engineering Dynamics, Inc. relating to its Iranian sales. Most of the communication was only for the purpose of calculating and paying commissions that were due to EDI. There were merely a handful of communications from EDI to the Brazilian distributors and of those communications none ever indicated that EDI was directing the distributor to sell the goods to Iran.
The indictment does raise the question as to the reach of U.S. sanctions against Iran. If a U.S. company sells an item to a foreign distributor who later sells an item to a sanction country, the U.S. company is not liable for that sale unless there is evidence that the original US export was made for the purpose of reexporting the goods to the sanctioned country. This is a lesson to be learned for many companies, it is a good idea to obtain an undertaking from foreign distributors that the exporter’s products won’t be sold to a sanctioned country. This is especially important because it is very hard for a U.S. exporter to prove that the distributor was solely responsible for the sale and that it was made with no prior knowledge, participation or assistance of the U.S. exporter.
More information:
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:
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:
On September 25, 2007, President Bush spoke out about his outrage at the continued oppression of the people of Burma at the United Nations. He urged the United Nations and all nations to use both their economic and diplomatic leverage to help the Burmese people become free once again. Many people in Burmese have been arrested for peacefully expressing their views in opposition to the oppressive military junta.
President Bush announced that he will tighten the economic sanctions against Burma, since the issuance of Executive Order 10347 and the enactment of the Burmese Freedom and Democracy Act in 2003 the United States has been participating in an ongoing battle to keep the people of Burma free. With the newly tightened rules, members of the regime who are responsible for violations of human rights and for delaying Burma’s transition to democracy will be unable to get visas to the United States. The visa ban will also include any persons who benefit from the regime’s abuse.
Bush has also announced that the United States will review all existing policies regarding Burma and do all they can to help with humanitarian groups. Humanitarian groups are focusing on the issues of health and education in Burma at this time.
More information:
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:
In the April 17, 2007, Federal Register the US State Department announced sanctions on 14 new entities due to actions that potentially make a material contribution to the development of Weapons of Mass Destruction in Iran and Syria. The sanctions prohibit export license approvals and US Government procurement from, assistance to, and exports to the listed entities. The sanctions have little impact on the newly listed entities in Syria and Iran because those countries are already subject to comprehensive US trade sanctions.
These sanctions do not directly prohibit all transfers of items subject to US export/trade controls to the listed entities. As a practical matter, however, exporters and reexporters should add the listed entities to the prohibited parties list against which they screen their transactions because this notice creates a Red Flag that the listed entities may intend to transfer items to weapons programs in Iran and Syria. If you find a match, you should investigate the Red Flag to determine whether your items will be illegally diverted-if your investigation makes you comfortable that your items will not be diverted, document your investigation and proceed with the transaction. Alternatively, you might want to implement a simple policy of never doing business with the listed entities because they are members of this list, even though you could legally do business with them.
Specifically, the sanctions on the entities are:
The Listed Entities are:
The penalties will be in effect for 2 years unless the Secretary of State deems otherwise.
Source:
Iran’s refusal to stop its uranium enrichment program has resulted in new sanctions against them being unanimously approved by the UN Security Council. On Saturday, March 24th, the United States, China, Russia, Britain, France and Germany all voted to enact the new sanctions.
Changes include a ban on Iranian arms exports and a freeze on the assets of 28 entities with involvement in Iran’s nuclear programs. Many of these entities are linked to Iran’s Republican Guard.
The new sanctions are considered modest by most standards. The United States and the Europeans favored stronger measures and the Chinese and Russians were in favor of a less stringent approach. The goal is the make it clear to the Iranians that their failure to comply with demands to suspend their enrichment activities will have consequences. Iran defiantly rejected the sanctions and stated that it would not suspend its nuclear programs. Iranian officials maintain that their nuclear activities are solely for the purposes of energy production.
Source:
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
On Saturday, September 30, 2006, President Bush signed into law the Iranian Freedom Support Act. In addition to codifying existing sanctions against Iran, this act added significant new ones, targeting Iran’s efforts at nuclear proliferation, as well as the companies that assist them.
The act requires the President to impose these sanctions on any company or individual who knowingly provides goods, services or technologies to Iran which would aid them in acquiring, or developing, nuclear, chemical or biological weapons.
It is mandatory that the President impose sanctions on violating companies, but he does have the flexibility to choose among six separate sanctions. They are:
Offending companies must be published in the Federal Register. No company has been listed yet, but it is likely that Russian and Chinese companies who have assisted Iran with nuclear facilities and missile technology will be among the first.
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.
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