Export Control Blog

From one of my favorite radio shows, public radio's Marketplace, two pieces on Iran from earlier this week.  The first, reporting from Tehran on European companies' head-first dive into the Iranian market and the second a companion opinion piece on the utility of sanctions.

Some interesting reporting on aerospace visionary Burt Rutan's testimony before the House Science Committee's space subcommittee here.  Scroll about two-thirds of the way down the page -- turns out that the ITAR is making it difficult for Rutan's company to share information about its commercial spacecraft with Virgin Galactic, a prospective buyer.

I just noticed this web-only story from Time featuring a photo of House Majority Leader Tom DeLay, puffing away on a genuine Cuban cigar within the posh confines of Jerusalem's King David Hotel in 2003.  DeLay is ordinarily a hardliner on Cuba, though this stridency apparently doesn't extend to moments of personal indulgence.  Time writer Karen Tumulty concludes:

DeLay's smoke may have run afoul of his principles, but it did not violate U.S. regulations at the time. However, it would now. Last September, the Treasury Department Office of Foreign Assets Control tightened its prohibitions against U.S. citizens importing or consuming Cuban cigars. Even Americans licensed to bring back up to $100 worth of Cuban goods are no longer allowed to include tobacco products in what they carry. The regulation also noted that Americans are barred not only from purchasing Cuban goods in foreign countries, but also from consuming them in those countries.

There are a couple problems with this paragraph.  For starters, the Office of Foreign Assets Control, which administers the Cuba embargo, did not publish anything Cuba-related last September.  (Here's a handy list of all OFAC actions in 2004.)  Instead, Tumulty probably refers to OFAC's Cuban Cigar Update (pdf), which the agency put out last October and which is not technically a regulation at all, but more of an interpretation/reminder.

Here's what OFAC said about buying Cuban cigars in third countries on October 4, 2004:

The question is often asked whether United States citizens or permanent resident aliens of the United States may legally purchase Cuban origin goods, including tobacco and alcohol products, in a third country for personal use outside the United States. The answer is no. The Regulations prohibit persons subject to the jurisdiction of the United States from purchasing, transporting, importing, or otherwise dealing in or engaging in any transactions with respect to any merchandise outside the United States if such merchandise (1) is of Cuban origin...

Time seems to think this represents a change from the previous rules, but that is just not the case.  There have not been any changes to the section (31 CFR 515.204) of the Cuban Assets Control Regulations which prohibit a US citizen from purchasing Cuban origin merchandise (e.g. cigars) in a third country (e.g. Israel) since DeLay's journey to Jerusalem in July 2003. In other words, purchasing a Cuban cigar abroad was just as much a violation of the Cuba embargo then as it is today.  The "recent revisions" OFAC refers to in the cigar memo were to the restrictions on imports of Cuban goods by travelers licensed by OFAC to visit the island not to the rules banning third country purchase of Cuban origin items.

So I cannot help but conclude that Time's story is wrong.  If DeLay indeed bought a real Cuban cigar while abroad, he violated the US embargo on Cuba.  (For what it's worth, this would not be the first time the majority leader's love of cigars trumped his respect for the rule of law.)

It might make sense to add here that I am not especially fond of either the slippery Mr. DeLay or the asinine Cuba embargo.  But if our government is going to chase after all kinds of average Americans for running afoul of this misguided policy, surely one of our highest ranking elected officials should be held similarly accountable.

Robert Wright does some deep thinking on the NYT op-ed page today about the long-term terrorist threat to the US and concludes:

Unless I've overlooked an option, there is ultimately no alternative to international arms control. It will have to be arms control of a creatively astringent, even visionary, sort. And achieving it will be a long haul - incremental, halting progress, over many years, through a series of flawed but improving agreements that are at first less than global in scope. But for now the details don't matter, because the Bush administration opposes the basic idea.

Why? Because John Bolton is not just the undersecretary for arms control, but the guiding spirit, so far, of the administration's arms control philosophy. To get other nations to endure intrusive monitoring, America would have to submit to such monitoring. People of Mr. Bolton's ideological persuasion insist that this amounts to a sacrifice of American sovereignty. And they're right; it's just a less objectionable sacrifice of sovereignty than letting terrorists blow up your cities.

Weeks before 9/11, the Bush administration antagonized much of the civilized world by rejecting an arduously negotiated protocol to the Biological Weapons Convention. The protocol would have put teeth in the treaty, making member nations, which forswear the possession of bioweapons, open their soil to inspectors.

Would 9/11 and the ensuing anthrax attacks soften the administration's opposition? Or - since the protocol was no doubt imperfect - might the administration at least suggest an alternative international inspections regime? Two months after 9/11, Mr. Bolton told a gathering of member states that the answers were no and no. (Who needs inspections? Mr. Bolton told the assemblage that the existence of Iraq's bioweapons program was "beyond dispute.")...

The most frustrating aspect of arms and dual-use export controls for American companies is often the disregard shown by the government toward the foreign availability of the items in question.  It's one thing to be told that no responsible government will permit the a sale to a particular bad guy or bad government, quite another to be told that you, a US exporter can't, no matter that the Italians/Israelis/Indians are sure to go ahead and seal the deal.

Often it is US negotiators who struggle to convince their counterparts in the various multilateral export control regimes of the need to tighten up on particular hardware or technologies, even at a cost to their domestic industries.  Do you think their job is made easier by someone like Bolton, who rejects most any US compromise in the name of sovereignty?  You've got to give a little to get a little.  Bolton seems to prefer giving nothing and getting nothing in return (see North Korea).

Matthew Yglesias joins Wright in the fight against Boltonism here.

Apropos yesterday's post on the US, EU, and ILSA, take a look at this NYT story on Iran's attempts to use its oil resources to win friends and influence people.  Writer Jad Mouwad mentions ILSA, but not that the sanctions it authorizes have never actually been implemented.  However, in nonetheless citing the hesitancy of some Asian and European investors to get too deep in Iran, he makes an important point -- the uncertainty created by the mere threat of ILSA sanctions and other US policies antagonistic toward Iran go some way toward discouraging investment even without the need to mete out actual punishment and thereby risk conflict with the Europeans.

Today I am pleased to bring you the first guest post to this blog, but first some background on the topic at hand.

It's been nearly seven years now since BIS first introduced the Simplified Network Application Protocol (SNAP) to the exporting community at the annual Update conference in Washington.  SNAP is a website (ID/password required) which enables exporters to submit export license applications, reexport license applications, commodity classification requests, and other notices to BIS.  And certainly it's a big step forward from the days of paper applications.

I speak from some experience here as I participated in a SNAP beta test during my first consulting stint and have used it on and off ever since.  So it is more out of sorrow than anger when I tell you that SNAP's limitations are also sometimes infuriating, that it's built on creaky technology reminiscent of the early days of the web (Perl and frames, anyone?), and, most disappointing of all, that it has not been improved in any significant way since its introduction.

To take one example of SNAP vaporware, BIS first said they were working on the submission of supporting documents via SNAP in their FY 1999 annual report.  The FY 2000 report claimed that the feature was coming in July 2001, followed by the next year's report (pdf) which said the functionality would now be ready sometime in FY 2002.  Then came the FY 2002 report (pdf) (see where this is heading?) which told us that electronic document submission would roll out to a test group in early 2003.  By the time the FY 2003 report rolled around, any mention of electronic document submission was dropped, replaced by a vague reference to a "limited SNAP+ pilot."  And in the FY 2004 report there's no mention of SNAP at all.  Needless to say, exporters still must fax in supporting documents and some poor soul at BIS still has to collate all this paper and get it into their license processing system.

But I digress.  I promised you a guest post and here it is from John Black of Black, Sengers & Associates:

Why does SNAP suck?

My main problem with SNAP is that sometimes it works and sometimes it doesn't.  I submitted one application three times and kept getting an error message saying I was using a non-existent ECCN, even when I picked the ECCN from a pull down list.  I finally called BIS for help and after talking to several different BIS officials, I was told that I had to divide my application in half and submit two applications because I had more products on my application than SNAP could handle.  The first time I did that I did not receive the normal email confirmation from BIS that my applications were accepted.  So I resubmitted the two applications -- then BIS called and asked me why I sent in two sets of applications.  I should have submitted the application on paper.

Other than that, it is easy to see that the format and functionality of SNAP was created a long time ago.  It is not easy to move backward and forward through SNAP.  It does not allow me to print a copy of the form on which I list the products to be exported.

OK, so just now I went to the SNAP site to remind myself of why I don't like it and I got a message that my account is "locked out" and I have to call BIS to reset it.  I better shut up.

Thanks for sharing, John.  If you've got any SNAP rants of your own, send them in.

With the Australia Group meeting in Australia, Australian Foreign Minister Alexander Downer takes to the pages of The Australian with an op-ed on the importance of international coordination on export controls related to chemical and biological weapons.

Did I mention Australia?

Switzerland is ending its arms embargo on Turkey:

Switzerland has quietly ended a years-long arms embargo on Turkey but Ankara still keeps Swiss weapons suppliers on its "red list."

The surprise Swiss move came a week before Foreign Minister Micheline Calmy-Rey paid an official visit to Turkey on March 29, according to diplomatic sources. "It was a gesture, but it also sent messages to Ankara at many wavelengths," said one source. "The decision to remove the embargo is a de facto recognition by the Bern government of Turkey's EU reform efforts, and an intention by Swiss arms manufacturers to make an entry into the lucrative Turkish market."

Switzerland had been a regular supplier of small arms and ammunition to Turkey until 1991, when it imposed an arms embargo against Ankara because of alleged human rights violations. Despite the embargo, Swiss suppliers sold armaments to Ankara through licensing deals...

Read the rest from Turkish Daily News.

 

The Iran-based director of the huge French oil company Total isn't worried about Iran-Libya Sanctions Act, according to The Tehran Times.  And why should he be?  Neither President Clinton nor President Bush have ever actually imposed sanctions under ILSA, which was intended to punish non-US companies for investments in Iran and Libya.  Not surprisingly, the Europeans, Canadians and others regard ILSA's extraterritoriality as illegal under international law as well as an infringement of their right to regulate their own economies.  Shortly after ILSA became American law, the EU implemented blocking legislation of its own barring European firms from complying with the new sanctions.

In fact there's some sense of irony here as Total was the first company to receive a presidential waiver under ILSA (from Clinton, back in 1998).  But for all the tough talk on Iran from the current administration, their approach to ILSA is essentially unchanged from that of their predecessors -- engagement and dialog with the EU on Iran rather than punitive sanctions on European companies.

The ILSA saga (and the closely related and somewhat better known Helms-Burton bill) reflects the limits of US unilateral power.  Sanctions, embargoes, and export controls exist at the intersection of economic and national security interests.  Sometimes these interests overlap, but often they contradict.  And while the US continues to hold unrivaled military superiority in the world, in economic and trade matters the EU is much more of a match for American power. Both Clinton and Bush (wisely, in my opinion) realized that a fight with the EU over ILSA could escalate into a major trade war -- one that the US would quite likely lose at the World Trade Organization -- and made the decision to de-escalate by waiving the sanctions contemplated under the legislation.

This spirit of détente has reigned for the past few years, but if Iran manages to split the US and EU over their joint efforts to detach Iran from its ambitions to master the nuclear fuel cycle, we could well see a return to the extraterritorial sanctions battles of the mid-late 90s.

If military or civilian technology transfers are a matter of interest for you, check out the details on this conference coming up June 27-28 in Washington.  The title may be a bit of a mouthful -- Ensuring Export Compliance with Export Controls on International Technology Transfers -- but the speakers include Norm LaCroix and Mark Turner from BIS, several of the best export control attorneys around, and a number of knowledgeable folks from industry including Tom Albertson, a former colleague of mine from Microsoft.

Both California and New York CLE credits are available and it's all available for the low, low price of $2200 (or $1700 if you skip the workshop on the second afternoon).

And, as always, let me state for the record that I will (sadly) reap no monetary benefit if you attend.