US, Israel, and Palau Vote YES! on Cuba Embargo

In an October 29, 2008 Associated Press report, the popular vote tally was reproduced for the United Nations General Assembly's (UNGA) resolution urging the United States to repeal our trade embargo against Cuba. The United States, Israel, and Palau voted against the resolution. The Federated States of Micronesia and the Marshall Islands boldly abstained. Almost all of the rest of the world, 185 total votes, voted in favor of the resolution.

Some have claimed that Wednesday's vote represents the seventeenth straight year that the UNGA has demanded that the US end its trade embargo of Cuba. Evidently, these commentators are unaware that we use the electoral college system in the US for national votes. The electoral college gives the US 538 votes. According to the scorecard, the final tally is 185 votes to end the embargo; 540 votes to continue it.

An undisclosed source and spokesperson for the US had this to say about Wednesday's vote:

Because the United States uses the electoral college system, we really don't need to worry about these UN General Assembly votes. I mean, we really don't even need to think about these votes unless 350 some-odd new countries suddenly pop up out of the ground. Even if that were to happen, we'd still have at least a few years before all those new countries could become UN member countries. I'm sure a few weeks without food and toiletry shipments could get [the Federated States of] Micronesia and Marshall Islands off the fence and back on the side of righteousness.

Representatives of Israel and Palau declined invitation to comment.

If It Quacks Like a Duck...

I don't usually spend too much time perusing the drug-related arrests at the US border, but the story written by Robyn Doolittle for TheStar.com was simply too enticing to pass up.

On September 11, 2008, Ron Obadia and his partner, Nadine Artemis, experienced the kind of déjà vu with US CBP typically only associated with learning your name is a dead ringer for someone on TSA's no-fly list. Just a few months earlier, on August 3, 2008, US CBP arrested the couple when a test of their raw chocolate bars indicated the bars could actually be hashish. The bars were not hashish. They really were just raw chocolate bars. Ron Obadia and Nadine Artemis run Living Libations, a natural food and natural beauty care company. Living Libations makes and sells the raw chocolate bars. Following the August 3, 2008 arrest, Children's Aid Society came to their home after being tipped off by the arresting officer that the couple were suspected of being major drug dealers based on the discovery of two bricks of hashish in their diaper bag. After submitting a sample of the raw chocolate to testing by Canada's Welfare Justice Department, Mr. Obadia and Ms. Artemis were completely exonerated of all charges associated with the August 3rd arrest.

One might ask why the couple would risk carrying the same raw chocolate bars back through a US Customs checkpoint. Selling this chocolate is an important source of income for the family. The point of the September 11, 2008 trip was to bring Living Libations' wares to the Raw Spirit Festival in Sedona, Arizona. The couple took extreme precautions:

Mr. Obadia and Ms. Artemis retained a top customs and immigration lawyer to notify the officials and smooth the way for their subsequent trip across the border. The lawyer traveled ahead, assuring that their exoneration files where duly noted in US border computers, and to notifying Customs Superintendents that Mr. Obadia and Ms. Artemis were going to venture across the border, with forensic certification in hand, and prepared for any questions, or FDA searches. Despite such top-level coordination, US Border Patrol re-arrested and re-interrogated the[m.]

The above paragraph is an excerpt from an October 8, 2008 press release, which truly details the couple's ordeal much more fully than your typical press release or blog posting.

Despite the precautions, which, in addition to the above, included hand-carriage and production of a letter from the Canada Department of Justice to CBP, the couple were arrested again on September 11. First, a drug-sniffing dog indicated on the raw chocolate bars. Then, CBP administered an NIK marijuana kit, which, while unreliable enough to be inadmissible as evidence in court, was relied upon by CBP to support the probable cause for the second arrest. An interesting reenactment of the administration of an NIK marijuana kit is available here.

I can accept that NIK marijuana kits are unreliable. However, the ingredients of the raw chocolate bars are "unrefined, unprocessed cacao, maca root, hemp seeds and goji berries." Hemp seeds come from plants of the genus Cannabis. Hashish comes from plants of the genus Cannabis. I am by no means a drug expert, but isn't it rational to conclude that the dog and NIK marijuana kit indicated a presence of cannabis because the raw chocolate bars contain a nonintoxicating cannabis ingredient?

Ding, Lim, and Cheng Indicted for Conspiring to Export to China

On September 26, 2008, usexportblog reported that BIS had issued a warning regarding the export of some rather mundane technology which could be used to support Iran nuclear proliferation activities. Among the technologies called out by BIS was the carbon fiber (ECCNs 1A002, 1C010, 1C210, and 1C990). On October 28, 2008, the District of Minnesota returned an indictment charging Jian Wei Ding, Kok Tong Lim, and Ping Cheng with conspiring to illegally export carbon fiber material to China. Also on October 28, 2008, the Department of Justice (DOJ) issued two press releases mentioning the indictment, BIS posted a third press release at its website on behalf of DOJ, and the FBI offered a fourth press release of the story. The District of Minnesota barely mentions the indictment among the recent filings posted to its website, and I have been unable to obtain a copy of the indictment.

According to the aforementioned press releases, Ping Cheng is a resident of New York and the sole shareholder of Prime Technology Corporation, which appears to be the same company to which the Department of Defense awarded a contract in 2007 for the procurement of nuts and washers. Jian Wei Ding and Kok Tong Lim are residents of Singapore and affiliated with FirmSpace (Singapore) Pte Ltd, purportedly a Singaporean import/export company which also seems to have an apparent interest in research and experimental development of electronics.

In an investigation conducted by BIS and ICE, it was allegedly discovered that Ding, Lim, and Cheng intended to illegally export carbon fiber material to the China Academy of Space Technology (CAST). The press releases state that CAST oversees research institutes working on spacecraft systems for the Government of China, but a quick study of CAST's website reveals that CAST currently also has a hand in supporting Pakistani satellite capabilities, and similar capabilities for the governments of Nigeria, Venezuela, and Brazil. The CAST website does not reveal any CAST involvement in missiles or uranium enrichment, although satellite and spacecraft launching technologies, in particular, frequently employ missile technology.

The press releases stress that carbon fiber material has "applications in aircraft, rockets, spacecraft, and [the] uranium enrichment process." Carbon fiber material also has applications in automobiles, bearings for any purpose, and bicycles. In fact, carbon fiber materials are receiving attention across various industries as a lightweight, fuel-efficient alternative to steel. ECCNs 1A002, 1C010, and 1C210 require licensing from BIS for exports to China unless the carbon fiber material falls within one of the list-based exclusions tied to the specific end uses called out under the associated ECCN. ECCN 1C990, in and of itself, would not require licensing from BIS for exports to China. BIS has suggested that carbon fiber material could fall under any of these four ECCNs, and, even for the initiated, navigating the CCL to find the correct classification for your carbon fiber material is among one of the more difficult self-classifications to proficiently execute. It will be interesting to read the indictment to see the theory under which BIS puts the screws to this Great Neck nuts and washers salesman.

Russia Irritated by Sanctioning of Rosoboronexport

On October 23, 2008, the Federal Register announced Department of State measures taken against thirteen (13) foreign persons in order to purportedly curtail proliferation activities in support of the governments of Iran, North Korea, and Syria. Among the sanctioned is Russia's sole State intermediary of defense and dual use technologies and services: Rosoboronexport. Rosoboronexport, or ROE, for short, is responsible for more than ninety percent of Russia's annual arms sales. While this is not the first time ROE has appeared on US lists of sanctioned parties, the announcement has received an enthusiastically bitter reception in Russian media circles. Unless "circumstances change in such a manner as to warrant a change in the duration of sanctions," ROE will be frozen almost completely out of the lucrative US defense market for another two years, which has prompted ROE to fire back at the US Government (USG), claiming that the sanctions are merely a tool the USG uses to bolster unfair preferential procurement practices.

These latest sanctions include the following measures:

• No USG department or agency may procure or contract to procure any good, technology, or service from the sanctioned foreign persons (unless the Secretary of State determines otherwise);
• No USG department or agency may provide any assistance to the sanctioned foreign persons and the sanctioned foreign persons may not participate in any USG assistance program (unless the Secretary of State determines otherwise);
• No USG sales of United States Munitions List (USML) items to sanctioned foreign persons are permitted, and all sales to sanctioned foreign persons of defense articles, defense services, or design or construction services under the Arms Export Control Act (AECA) are terminated, and;
• No new individual licenses shall be granted for the transfer of items controlled under the Export Administration Regulations (EAR) to sanctioned foreign persons, and any existing licenses are suspended.

Besides ROE, the Department of State's sanctioned Devil's dozen include:

• China Xinshidai Company of China;
• China Shipbuilding and Offshore International Corporation, LTD of China;
• Huazhong CNC of China;
• Islamic Revolutionary Guard Corps (IRGC) of Iran;
• Korea Mining Development Corporation of North Korea;
• Korea Taesong Trading Company of North Korea;
• Yolin/Yullin Tech, Inc., Ltd. of South Korea;
• Sudan Master Technology of Sudan;
• Sudan Technical Center Company (STC) of Sudan;
• Army Supply Bureau of Syria;
• R and M International FZCO of the United Arab Emirates, and;
• Venezuelan Military Industries Company (CAVIM) of Venezuela.

The sanctions extend to any successor, sub-unit, or subsidiary of any of the listed entities.

BIS Forces Neaz to Rethink Its Website

BIS updated its Denied Persons List today to include Neaz Trading Corporation (Neaz) of Pakistan. Astute readers of the BIS site will note that Yasmin Ahmed was also added to the list, and that she shared an address with Neaz. No coincidence. A May 23, 2003 Department of Justice press release confirms that Mrs. Ahmed and her husband, Tariq Ahmed, have an ownership interest in Neaz. BIS today issued a notice of a seven year denial of the privilege to swim in US streams of commerce for both Mrs. Ahmed and Neaz.

Neaz's website states that it was established in 1992 "under the dynamic leadership of Mrs. Yasmin Tariq." Piecing two and two together, it would not be surprising for one to presume that Mrs. Yasmin Ahmed, wife of Tariq Ahmed, and Mrs. Yasmin Tariq are one and the same. Slightly more surprisingly, Neaz's website boasts:

Under the current geo-Political situation we do not see any difficulty in obtaining export licensing and approval from the State Department of the U.S.A. to provide equipment, software and services to the Government of Pakistan.

After today's announcement, Neaz may wish to modify the above statement. While posting that update, Neaz's webmaster may also wish to clarify the names under which its dynamic leadership operates - to include not only Yasmin Ahmed, but also Fatimmah Mohammed, which, according to this report beginning at Page 17, is another name Yasmin Ahmed assumed in pursuing her unlawful objectives. Finally, companies with US presences who find their logos streaming across the bottom of Neaz's homepage may wish to contact Neaz's webmaster to renegotiate the use of their logos on the site. With a little forethought and coordination, Neaz's webmaster could save the company a bundle by executing all of these changes simultaneously.

DOD Memo on Open Source Software Likely to Forget about EAR's Encryption Rules

Joab Jackson of Government Computer News reported on comments made by the Office of the Secretary of Defense's Daniel Risacher at the Red Hat Government Users and Developers conference on October 8, 2008. Mr. Risacher told the audience that the Department of Defense intends to release a memorandum, possibly in early November, to clarify DOD's policy on the use of open source software. The memo will distinguish open source software from freeware and shareware, which DOD Instruction 8500.2 says DOD should not use due to an inability of DOD to obtain source code and regular and routine maintenance for freeware and shareware. In these respects, Mr. Risacher noted, open source software is not akin to freeware or shareware at all, and perhaps even preferable to commercial-off-the-shelf (COTS) software, as access to source code is free of most proprietary restrictions and maintenance of open source software is often provided free of charge.

Mr. Risacher went on to explain that the memo will also encourage the US Government to contribute source code back into the open source projects, insofar as:

• the government has the rights to the code;
• release of the code is in the best interests of the government, and;
• sharing the code does not violate any other government restrictions - like the International Traffic in Arms Regulations (ITAR).

Mr. Risacher opined that any such US Government contributions would be into the public domain.

Here, the ITAR will not pose an obstacle. The ITAR defines software as technical data at 120.10(a)(4). At 125.4(b)(13), the ITAR empowers the cognizant US Government department or agency to publicly release technical data in any form. Per 120.11(a)(7), any such technical data publicly released is in the public domain. The ITAR permits the US Government to contribute source code to the public domain. It would be helpful to industry if the US Government tagged the data as publicly released via 125.4(b)(13) at those times the government chooses to contribute otherwise ITAR-controlled source code to open source projects.

The more substantial burden to the government's prospective contributions is posed by the Export Administration Regulations (EAR). Per EAR's 740.13(e)(3), for encryption software or source code that would be controlled under ECCNs 5D002 or 5E002, respectively, notice must be sent to the Bureau of Industry and Security (BIS) and the ENC Encryption Request Coordinator at or before the time action is taken to make the software or source code publicly available. The notification must include either the internet location of the software or source code or a hardcopy of the source code. Moreover, BIS and the ENC Encryption Request Coordinator must be kept apprised of any changes to the source code if a hardcopy is provided and, if instead an internet location is provided, each time the internet location changes. Failure to comply with the notification requirements blocks access to license exception TSU and results in violation of the EAR for release of 5D002 software and/or 5E002 software to foreign persons without a license. BIS does not make available a list of internet locations of encryption software and source code notified and qualifying for license exception TSU, so it would be helpful if the government tagged the data as available for license exception TSU when the notification requirements have been satisfied.

Ironically, the ITAR would permit the government to publicly release military-strength encryption software categorized under USML Category XIII without additional requirements. Only the EAR's controls on strong commercial encryption software would require the government to fulfill an obligation to avoid violation of other government restrictions. It will be interesting to see if and how the DOD memo takes into account these different control regimes.

Federal Judge Restrains OFAC Designation

According to the story in the Toledo Blade, on October 9, 2008, Chief Judge James Carr issued a temporary restraining order to prevent OFAC from designating KindHearts for Charitable Humanitarian Development, Inc. (KindHearts) as a specially designated global terrorist (SDGT). Judge Carr's order was spurred by a request purportedly spearheaded by the American Civil Liberties Union (ACLU) to block OFAC from following through with the SDGT designation some two and a half years after the US Department of Treasury first acted against KindHearts. On February 19, 2006, Treasury announced the freezing of KindHearts' assets in order to prevent KindHearts from providing material support to terrorists and their facilitators. In the February, 2006 Treasury press release, the US Government laid out a persuasive case against KindHearts, revealing real and immediate links between the charity and Hamas.

If OFAC is unable to designate SDGTs without first receiving the concurrence of a court or judge, the International Emergency Economic Powers Act (IEEPA), as particularly energized by Executive Order (EO) 13224, become muted. But, due process does not necessarily mean resorting to a court or judge, and I suspect OFAC will attempt to fashion its own in-house version of Constitutional due process going forward if unsuccessful at overcoming Judge Carr's order via other legal means. Regardless, the order calls into question those mechanisms via which entities and individuals become listed on any of the denied parties lists and will be worth following. After all, KindHearts appears to be a litmus slam dunk for appropriate denial designation.

US Customs Settles Panty-in-a-Cone Conundrum

On October 14, 2008, CBP announced it had updated its online searchable database of CBP rulings with 141 rulings, bringing the total number of searchable rulings to 152,292. The Customs Rulings Online Search System (CROSS) provides free access to CBP determinations for Harmonized Tariff Schedule (HTS) Codes, or, in US terminology, Schedule B Numbers. CROSS exemplifies what the US Government can do to assist industry in navigating difficult and complex classification systems.

On October 9, 2008, Robert B. Swierupski, CBP's Director of the National Commodity Specialist Division, had the pleasure of answering a request for a classification ruling for a some curiously-packaged unmentionables being imported from China. What follows is an excerpt from the official ruling:

Dear Ms. Parker:

In your letter dated August 28, 2008, you requested a classification ruling. The sample submitted will be returned.

Style PP 1075703 "Women’s Panty in a Cone" is a hipster styled panty packed in a plastic container. The panty is constructed of 95% cotton and 5% spandex knitted fabric. The panty features side seams, a lined crotch panel, and elasticized self fabric capping along the leg openings and at the garment top. The plastic container measures approximately six inches and features a design which is similar to an ice cream cone.

You have indicated that the panty packed in the plastic container will be imported and sold as a unit. The plastic container is not specifically shaped or fitted to contain the panty. Your submission states that the panty is packaged in a re-useable plastic container. The plastic container, although of a novelty design, is not of durable construction and is of a type ordinarily discarded after the contents are removed. The container is not of a design or construction that is suitable for use other than as packaging. Therefore, your suggestion for classification under HTS 3926.90.9980 is not applicable and the container is classified with its contents. The applicable subheading for the style PP 1075703 will be 6108.21.0010, HTSUS, which provides for women’s or girls’ slips, petticoats, briefs, panties…and similar articles, knitted or crocheted: briefs and panties: of cotton, women’s. The rate of duty will be 7.6% ad valorem.

In sum, the Schedule B Number for the Panty-in-a-Cone is 6108.21.0010 - based on the panty; not the cone.

If you would like to request a classification ruling for your commodity, CBP makes the process for doing so available here.

Catholic Priest Advocates Expansion of Export Restrictions?

Snuggled between CCL entries for police shields and leg irons rests ECCN 0A980. For those of you unfamiliar with ECCN 0A980, it prohibits the export from the US of horses by sea. Section 754.5 of the EAR makes clear that the purpose of ECCN 0A980 is to strictly prohibit the export of horses by sea where the horses are destined for slaughter. Horse enthusiasts lobbied the US Congress and, in 1985, Congress passed the law prohibiting the cruel practice of exporting live horses on boats for the purpose of extraterritorial slaughter. Michael Melia of the Associated Press recently wrote an article which provides an illustrative example of how seafaring horses suffer in transit. The article reports on the condition of racehorses shipped by sea from Jacksonville, Florida upon their arrival four days later in Puerto Rico, which is not an export. For other exports of live animals, the US Department of Agriculture (USDA) maintains and directs certain minimal requirements. Interestingly, in 1891, the US Congress passed its first law pertaining to the safe transport and humane treatment of cattle exported by sea from the US.

In Australia, the law governing the export of live animals and animal reproductive materials came into operation in 1987. Most shipments of live animals carry reporting and licensing requirements. CathNews picked up this article from the October 13, 2008 edition of Farm Weekly. In an apparent protest of the practice of shipping live cattle by sea, Father Claude Mostowik blessed with holy water cattle as they were being loaded aboard a ship in Australia which was headed for the Middle East. A quick search on Father Mostowik revealed that he is also an active nuclear nonproliferation advocate.

Jesus Arrested on Criminal Smuggling Charges

Jesus Argandona, a Mexican businessman, was arrested Thursday night upon arrival from Mexico City at the San Antonio airport on criminal charges related to a conspiracy to smuggle blank compact disks from the US to Mexico. He will be charged under 18 U.S.C. § 555, which, as Clif Burns pointed out, is a recodification of 18 U.S.C. § 554 - despite the incorrect citation provided by the US Attorney's Office for the Southern District of Texas in its October 10, 2008 news release. 18 U.S.C. § 555 carries a maximum penalty of ten years imprisonment and a $250,000 fine. One of Argandona's alleged co-conspirators, Jesse Thomas Doria, a Laredo, Texas businessman, pleaded guilty to attempting to illegally export goods from the US to Mexico and has been sentenced to six months imprisonment and three years home confinement. Two other alleged co-conspirators, Eustolio Rossell and Rafael A. Morales, also Laredo businessmen, have pleaded guilty to attempting to illegally export goods from the US to Mexico and are awaiting sentencing.

So why all the hubbub about an export of blank CDs? The CDs were imported to the US from China - about $600,000 worth of blank CDs. Argandona allegedly hired Thomas to illegally export the CDs to Mexico. According to the criminal complaint, Argandona allegedly instructed Thomas to hire Morales, a licensed customs broker, to arrange for the cancellation of the in-bond documents associated with the import of the CDs into the US from China. Morales allegedly hired Rossell to bribe a US Customs and Border Protection (CBP) officer to sign-off on the cancellation of the in-bond documents. Morales has admitted to providing a cooperating defendant $2,000 to bribe a CBP officer for some unrelated shipments of textiles from the US to Mexico. According to the reports, Rossell, apparently engaging in a little pit of puffery to impress the shady business community with his illicit connectedness, canceled the in-bond documents himself and forged a CBP officer's signature. The US Attorney's Office found no corrupt CBP officer in its investigation.

Why would someone want to falsify in-bond documentation if the goods were not going to be consumed in the US? By falsifying the in-bond documentation, the origin of the goods can be disguised - resulting in lower duties and fees being assessed against the transaction.

On January 12, 2008, US Immigration and Customs Enforcement (ICE) detained two in-bond shipments from China which comprised of four trailers of blank CDs from a warehouse owned by Thomas.

It is interesting here to speculate what may have tipped off ICE to the alleged conspiracy. It could have been that CBP recognized Rossell's forged signature on the in-bond cancellation as a fake. It could have been information provided by the unnamed cooperating defendant mentioned in the US Attorney's Office's April 28, 2008 news release. Or, it could have been ICE was onto a pattern of criminal behavior established by Morales. According to a July 12, 2008 story by Jason Buch in the Laredo Morning Times, Washington International Insurance Co. (WII) had filed a civil suit against Morales and his customs brokerage company which resulted in settlement. According to Buch's story, WII brought the civil suit after first attempting to defend Morales against 194 CBP claims against Morales amounting to over $300,000 in fines for which, as Morales' insurer, WII was responsible to pay. Finding Morales had no viable defense against the claims, WII filed suit to recover its payouts from Morales. Most of the CBP claims were for liquidated damages and demands for payment associated with CBP being unable to inspect in-bond shipments of Chinese textiles destined for Mexico. WII commented that it had never before seen so many claims against in insured in such a short period of time. The Rafael A. Morales, Inc. website makes no mention of the WII civil suit or settlement or any of the charges or claims brought against Morales.

Travelers' Privacy Protection Act of 2008

On September 29, 2008, the Travelers' Privacy Protection Act of 2008 was introduced in both Senate (as S. 3612) and House of Representatives (as H.R. 7118). The legislation is intended to limit searches of United States residents' laptop computers at US border crossings. The Travelers' Privacy Protection Act of 2008 rejects the US Department of Homeland Security, Customs and Border Protection (CBP) policy published on July 16, 2008. Senator Russ Feingold's (D-WI) website quotes Senator Feingold:

Most Americans would be shocked to learn that upon their return to the U.S. from traveling abroad, the government could demand the password to their laptop, hold it for as long as it wants, pore over their documents, emails, and photographs, and examine which websites they visited – all without any suggestion of wrong-doing. Focusing our limited law enforcement resources on law-abiding Americans who present no basis for suspicion does not make us any safer and is a gross violation of privacy. This bill will bring the government’s practices at the border back in line with the reasonable expectations of law-abiding Americans.

I must not be most Americans.

US courts have consistently held that Constitutional protections are minimal when applied to an individual seeking to enter the US. You get the basic black-letter protections, without the frills of interpretation and precedence established for folks already admitted to and acting in the US. For example, a CBP officer has no obligation to give you a Miranda warning when questioning you at the border. You have a very basic Fifth Amendment right against self-incrimination. If you refuse to answer a CBP officer's question, the CBP officer can deny you entry into the US, or can detain you without any other cause for a limited period before denying you entry into the US. The same is true of your Fourth Amendment right against unreasonable search and seizure; the difference being that at the border, it is not unreasonable for a CBP officer, without suspicion or probable cause, to search your person and your property. For as long as there have been sovereign territories, subjecting oneself to inspection has been the regular price of admission.

The proposed legislation's title - the Travelers' Privacy Protection Act of 2008 - belies its misguided (though well-intended) underpinnings. Any right to privacy is premised upon an expectation of privacy. What person is so great that he or she deserves privacy at the time he or she seeks admittance to these United States? What person is so ego-centric that he or she expects to be able to invoke a right to privacy in response to a CBP officer's inquiry? It is the duty of every law-abiding US resident to suffer the pains and tolls attendant to a CBP officer's inquiry in order to collectively combat those unsavory elements - some of whom are homegrown - from capitalizing on our aspirations toward absolute freedom to further their illicit transnational schemes.

Hindering CBP with new requirements for warrants, additional supervision, and ethereal thresholds will very likely achieve a liberalization of traveler scrutiny at the border. But what new freedoms next will be pursued? Will cargo owners get their own legislation to thwart inspections of containers at the border on the same grounds of a right to privacy? Is liberalizing the border truly in the nation's best interest? Or could it be that more aggressive weeding at the fringes nurtures the most positive and productive growth in the interior?

To relate all of this back to export compliance, some industry leaders have recognized an increase in searches and seizure of electronic devices and their contents - both in the US and abroad. In order to protect company proprietary and customer-sensitive information, company's have instituted rules requiring employees traveling internationally to carry sanitized laptop computers with only the minimum required load of software and data. It seems to me that this industry best practice could be adopted by individuals, too.

Vote "No" on the Travelers' Privacy Protection Act of 2008!

Do Not Buy Cuban Cigars For Sale on the Internet

The US Department of the Treasury's Office of Foreign Assets Control (OFAC) has released recent civil penalties information. Again, individuals have been fined for purchasing "Cuban-origin cigars offered for sale on the Internet." The transactions discovered by OFAC go back as far as October, 2004. Neither of the two individuals OFAC fined voluntarily disclosed the activity to OFAC. Altogether, the fines OFAC collected from the two individuals levied an average cost of $364.25 for each of the eighteen months during which the transactions cumulatively occurred. If you are in the United States, or are a US citizen, please do not buy Cuban cigars over the internet. It is akin to blowing through a known speed trap at the end of the month.

Anatomy of a DDTC Marketing License Application

The ITAR's definition of Technical Data at § 120.10 excludes "basic marketing information on function or purpose or general system descriptions of defense articles." But what do you do when your company wants to include Technical Data in its marketing activities to foreign persons?

During the marketing phase of a potential effort, is a foreign party willing to sign up to a Technical Assistance Agreement? Will the marketing activities be confined to the four corners of a document so that your company can arrange to make use of § 125.4(b)(13); thereby converting Technical Data to information approved for release to the Public Domain as described in § 120.11? If the answer to these questions is "No" then your company's planned marketing activities may be an ideal subject for a DSP-05 Marketing License.

The DSP-05 license is known as the vehicle via which unclassified ITAR-controlled hardware and/or Technical Data are authorized for export. Essentially, a DSP-05 Marketing License is a specialized version of the latter class. The DSP-05 Marketing License authorizes the export of unclassified Technical Data to the foreign parties identified on the license. When the application is written well, DDTC has approved DSP-05 Marketing Licenses for the authorized export of Technical Data in the form of marketing, presentations, demonstrations (note that for hardware demonstrations outside of the US, a DSP-73 temporary export license will also be required to authorize the ITAR-controlled hardware component of the demonstration), meetings, discussions, the release of trial version ITAR-controlled software, and proposal submission to foreign parties.

What you will need to get started:

• Company Letterhead
• Thorough Description of the Product and/or Capability
• Physical Addresses of ALL Foreign Parties
• D-Trade Forms and Viewer
  

On the Company Letterhead, write out a Supplementary Explanation of Transaction. The writing should include:

• Introductory Paragraph (What foreign parties are the object of the marketing activity? What will you market? How will you market it? Why is this license required?)
• Background (Give a thorough description of the Product and/or Capability. How was the Product and/or Capability developed?)
• Purpose (What is the purpose of the license? The purpose tends to be an amplified restatement of the Introductory Paragraph. List other foreign parties ("Teammates") who require access to pre-proposal information in order for your company to be able to offer a solution that meets the needs of the potential foreign customer.)
• Identification of Foreign Parties ("Company hereby requests authorization to export unclassified technical data to the following parties:" List all of the foreign parties in a table, including physical addresses for the foreign parties)
• Description of Controlled Services, Systems, etc. Ancillary to the Request, but also Likely to be Discussed (To perhaps include, but certainly not limited to "Discussions may include actual demonstration and manipulation of data, systems and components to allow analysis and customized synthesis with extent architectures.")
  
• Self-provisos ("Company recognizes the following limitations:" List all those areas of concern to DDTC that will not be part of the marketing effort - e.g., "US Government proprietary nuclear, chemical and biological weapons detection and defeat technologies." In a DSP-05 Marketing License application, a successful outcome is largely dependent on what you tell DDTC you are absolutely not going to do as part of the marketing activities. Self-limitations/self-provisos demonstrate to DDTC that your company has thoughtful consideration for and internal discipline with regard to the rules and controls)

With the Supplementary Explanation of Transaction complete, it is time to complete the electronic DSP-05 license application. To view, complete, sign, and submit the application, you will need to ensure you've downloaded the latest version of the PureEdge Form Viewer from DDTC's D-Trade Information Center.

In completing the DSP-05 Marketing License application, here are some pointers:

• Block 3 - Keep in mind that an approved DSP-05 Marketing License can cover a broad territory. Ensure all foreign party countries are represented in Block 3. Every country you choose must be attributed to at least one party in Block 14.
• Block 9 - Unit Type = Lots.
• Block 10 = "Technical data in the form of marketing, presentations, demonstrations, meetings, discussions, and proposal submission related to..." Input your Product or Capability at the end of this phrase.
• Block 10 - Defense Article Type = Technical Data.
• Block 12 - Unit Price = Some nominal dollar value. What is the value of the Technical Data exported during the marketing phase? Probably zero, but since this field will reject zero values, put a nominal value, like $300, in as a placeholder UNLESS marketing activities will involve exports of Technical Data of a quantifiable value.
• Block 14 - List all foreign parties. When it comes to technical data, all exports are permanent; therefore there is no such thing as a foreign consignee on a DSP-05 Marketing License.
• Blocks 15, 16, 17, 18, and 19 - Check the Box designating "Same as Block [X]" or "None". Regarding Block 16, see Block 14 description above. Regarding Block 18, while DDTC states this block should be used to list third country locations of exchange of Technical Data under an approved DSP-05 license for export of unclassified technical data, I've never encountered a third country exchange related to a DSP-05 Marketing License.
• Block 20 - Copy the text of the letter you've attached as a Supplementary Explanantion of Transaction into Block 20 - preserving first and foremost those paragraphs related to positive scope.
• Block 21 - List your preferred freight forwarders just in case you need to ship a controlled document out or conduct some other international exchange in hardcopy.

Attach all pertinent backup under the most appropriate label in the DSP-05 application template cover sheet. You now should be ready to submit. For technologies introduced to DDTC and DTSA for the first time, expect a sixty-day review. For all others, be sure to attach precedent cases and expect a closer-to-thirty-day review.

BIS Gives Industry the Finger

BIS published a Final Rule amending the EAR to capture revisions based upon its systematic review of the Commerce Control List (CCL). Among the changes is an addition of a note to ECCN 4A980 stating that the ECCN "does not control equipment limited to one finger and designed for user authentication or access control." This minor change signals a willingness of BIS to take some additional steps toward liberalizing the tight controls on US-origin biometric identification equipment, software, and technology, which, under ECCNs 3A981, 3D980, 3E980, 4A980, 4D980, and 4E980 are controlled for reasons of Crime Control (CC) in accordance with the EAR's 742.7 and require an export license for most instances of export due to the special restrictions on CC at 740.2(a)(4). By virtue of this latest amendment, international travelers will be permitted to carry laptops employing basic fingerprint authentication without having to obtain a license for the biometric security device, which serves to enhance the safeguarding of any US-origin data and technology on the laptop.

More than a dozen ECCNs have been affected by the rule. I'll not attempt to recite (or even summarize) all of the changes - especially since I won't be able to make heads or tails of some of them until I see them incorporated into the EAR. The other changes I found to be worthy of noting include:

• A definition of the term "alloy" in a new Technical Note 2 to ECCN 2B350. For the purposes of this ECCN, "metal alloys... are those containing a higher percentage by weight of the stated metal than of any other element."
• For ECCN 4A101, the phrase "radiation hardened" has been defined as meaning "that the component or equipment is designed or rated to withstand radiation levels which meet or exceed a total irradiation dose of 5 X 10^5 rads (Si)."

There's just something really special about definitions of terms to which I'm particularly drawn. Stay tuned on that note.

Professor Acquitted, But Sister Gets Convicted

Darrin Hanna, an assistant engineering professor at Oakland University and founder, president and owner of Technology Integration Group Services, Inc. (not to be confused with Technology Integration Group), was acquitted of all charges related to shipments of global mobile communications systems and global positioning systems to Iraq in violation of an embargo that was in place at the time.

Darrin Hanna's sister, Dawn Hanna (pictured above left), was in charge of international sales and marketing of her brother's company, and was purported to handle most of the international dealings while her brother was busy with his university job. Dawn Hanna was convicted of conspiracy, five illegal export counts, money laundering, and making false statements to investigators. She was acquitted on a single export violation count by the twelve-member jury. For conspiring to launder money, Dawn Hanna faces a maximum penalty of twenty years in prison and a $500,000 fine. She is to be sentenced on January 22, 2009.

The siblings were indicted on ten counts on July 25, 2007. The Iraq contract was estimated to be worth about $9.5 million, and involved a complicated network of companies and middlemen in Syria, Jordan, the United Kingdom, Germany, and the United States. It is estimated TIGS reaped over $1 million in profit from its part in brokering the sales.

One of the more interesting pieces of the trial, as described by Paul Egun of the Detroit News, occurred during jury deliberations, which spanned more than twenty-seven hours and five days. On the afternoon of the fourth day of deliberations, jurors sent U.S. District Judge Marianne O. Battani a note asking: "If Darrin knew it was illegal on July 17, 2007, would he still be in violation of the laws in question?"

Lawyers and Battani said they were puzzled by the question because the date had little relevance to any of the evidence presented at trial. After discussions with the lawyers, Battani sent back a note referring jurors to one of the jury instructions previously provided.

The jurors wrote back: "So should we ignore the dates in the indictment?"

Battani discussed the second note with the lawyers before returning a note stating that in order to convict either defendant, the government must prove beyond a reasonable doubt that each element of the offense occurred within the time frame set out in the indictment.

Apparently, the jury believed Darrin Hanna lacked the required mental state to be convicted.

Dawn Hanna's testimony that she believed she had acted legally and that at least some of the items were destined for Turkey appears to have been less persuasive to the jurors. Prosecutors had evidence of emails from Dawn Hanna talking about the goods going to Iraq.

IN OTHER NEWS: Despite National Association of Manufacturers (NAM) support for proposed license exception ICT, Clif Burns has this one right.

BIS Update 2008, Day 3 - Census Offers Industry Audit Assistance

The third day of the BIS Update 2008 Conference brought an unexpected delightful surprise in Mrs. Dale C. Kelly, Acting Chief of the Regulations, Outreach, and Education Branch of the US Census Bureau. While speaking on a panel dedicated to discourse on Approaches to Compliance, Mrs. Kelly mentioned that companies can obtain up to a year's worth of AES records for free from the US Census Bureau.

Intrigued, I approached Mrs. Kelly after the panel and told her that my company had experienced difficulty, at times, in obtaining AES records from freight forwarders - especially where the company had severed its relationship with a freight forwarder. Mrs. Kelly told me that if I sent her an email, she would send me the process and form for obtaining the free information from Census. True to her word, I found her response to my email in my inbox this morning. In our conversation, she mentioned that it would help if the letter explained that the company was requesting the information for audit purposes. Despite my best efforts to find an internet resource for this information last night, I was unable to do so. So, here it is.