Export Control Blog

Update Day 1: Kickoff Plenary

8:33am And it begins...and there's a theme -- it's "a decade of change". (I voted for moonlight & roses, but alas...)

8:36 Office of Exporter Services Director Eileen Albanese says the new and improved SNAP, SNAP-R, is live. I'll have to check that out.

8:38 Acting Under Secretary for Industry and Security Mark Foulon fast facts -- he's a Rhodes scholar and previously worked for a Democratic senator.

8:41 Foulon says BIS "committed to explaining what we are thinking in a direct, unvarnished manner and listening to what you say in return", but "listening does not always lead to full agreement".

8:42 Last year saw a 13% jump in applications, processed in average of 33 days, for about $36 billion in value.

8:44 Highlights cooperation w/China and India. Very brief mention of the proposed China military end-use rule. (BIS published additional guidance on this subject just last Friday.)

8:46 Last year: 34 criminal convictions and over $3 million in criminal fines; 104 administrative cases and $13+ million in penalties.

8:48 MF's turn at the annual airing of regulators' grievances about the failure to renew the EAA noted, but not particularly emphasized.

8:54 Newly-confirmed Assistant Secretary for Export Administration Christopher Padilla takes the podium.

8:57 Themes for CP's talk: 1) evolving nature of security threat, 2) globalization of high-tech R&D, 3) need to cooperate internationally on export controls. (There are similarities here to his statement to the Senate committee evaluating his nomination.)

9:00 BIS will expand the Validated End-User (VEU) license exception, which originated in the proposed China rule, to India and possibly other countries. This is potentially significant, depending on precisely how VEU shapes up.

9:04 Padilla says about the proposed China rule that it's "simply wrong to call this a catch-all" since it only applies to specific circumstances. He plans to visit allies to encourage them to take similar measures.  Count me among the skeptics that such an effort will bear much fruit.

9:06 Creating an intelligence liaison in his office who will work with a new interagency working group to evaluate end-users.

9:10 CP: "I will go to China"...to put on an export control seminar.

9:15 Now up -- a panel discussion moderated by Deputy Assistant Secretary for Export Administration Matthew Borman.

9:26 State's Deputy Assistant Secretary for Threat Reduction, Export Controls, and Negotiations, Acting Donald A. Mahley offers the story of bad end-user in a MTCR member country, which came under heat and moved next door to another MTCR state, which also shut it down.

9:28 Increase in membership of multilateral export control regimes is both good news and bad news. Bad news is the "least common denominator" problem -- unserious states "hogtie" the regime.

9:31 The DOD rep on the panel, Acting DTSA Director Beth McCormick...

9:34 McCormick says 2006 a banner year for Wassenaar with about 90 percent agreement on member state proposals.

9:39 Working with India and Pakistan on national export control programs. Israel, too, where BM says the government will be promulgating a new, strengthened dual-use export control law. (More on this subject from Israeli business newspaper Globes.)

9:41 Greg Suchan, Deputy Assistant Secretary for Political-Military Affairs, notes that the president can remove Nimitz-class aircraft carriers from the munitions list, but not civilian communications satellites. Also notes that interagency cooperation on export controls used to compare unfavorably to "whale poop", but is now significantly better than aforementioned marine mammal dung.

9:51 Suchan argues that "access to US defense technology is the quid pro quo" for many countries (specifically mentioning India) in a positive national security relationship with the US, as opposed to during the Cold War when many other tools were more available to US policymakers (troop deployments, security aid, etc.).

9:53 Says Israelis scooped up a lot of arms provided by many countries, including some "really good stuff", fired by Hezbollah during this past summer's war.

9:55 119 people arrested last year for Arms Export Control Act violations.

9:58 GS says DDTC's backlog is 10,000 cases! Somewhat more staff, including military officers, increasingly mandatory D-Trade are helping.

10:03 Q: Why does China rule sound so much like EAR National Security controls (on items excluded from such controls)? A: Wassenaar members can take action on "non-listed dual-use items".

10:05 Q: How can industry and gov't cooperate? A: We all have programs, GS says State trying to RWA less by working with applicants, increasing automated validation of application details in D-Trade.

10:06 That's it -- next stop is that ol' chesnut, encryption, in a breakout session scheduled for 10:30.

DDTC Investigating Israeli Use of US Cluster Bombs

David S. Cloud reports in today's New York Times that DDTC (which Cloud refers to by its previous moniker) is looking into Israel's use of cluster munitions in Lebanon. In doing so he understates the importance of the Arms Export Control Act by calling it an "agreement" which it is not. AECA is statutory law, duly enacted by Congress and approved by the president.

Whether Israel complies with the AECA is not a new issue.

Export, etc. 8/25/06

• You've heard of Driving While Black, now there's Using PayPal While Mohammed
• Boeing to model 767 tanker production ITAR compliance program on that of the 737-based P-8 Multimission Maritime Aircraft (MMA) (if they get the contract of course)
• "With night vision you can see how the genie escaped from the bottle"
• Treasury to name and shame banks holding North Korean assets?
• Guess what the Russian papers are saying about the latest US sanctions?
• Shining a light on the nuclear black market
• Aussies and Euros jar jar on MANPADS
• US sanctions ground Chinese-Singaporean joint venture Great Wall Airlines
• New York man charged under IEEPA for relaying Hezbollah's Al-Manar TV satellite broadcasts
• Oregon company crows about BIS warning letter

Export, etc. 8/18/06

• A very practical and technical discussion of how to spot SDNs and other risky business partners in your databases
• Japanese authorities launch investigation into unauthorized export of "dual use" Nikon device
• Must read piece on the proliferation of missile technology
• German Green Party pushed for arms embargo on Israel
• Boeing plows ahead in venture with recently-sanctioned Russian firm
• US-Venezuela relations: rancor and trade both on the rise
• Weadon and Kalinoski take another swing at the military catch-all rule (now clearly targeted exclusively China, which was wasn't clear at the time of their last salvo)
• Another very lengthy denial order: 20 years for unlicensed export of (6A002?) thermal imaging cameras to the UAE (last week there was one last week for 50 years)
• Hong Kong's trade rep in DC says risk of diversion to PRC was "Washington's number one concern"
• Big London arms exhibition bans cluster bombs (DSEi flashback)
• Crate-ology

Nasrallah Picks Up Some Nasty Russian Souveniers at the Damascus Bazaar

The Telegraph claims to have found Russian-made arms in the hands of Hezbollah:

Abandoned Hizbollah positions in Lebanon yesterday revealed conclusive evidence that Syria - and almost certainly Iran - provided the anti-tank missiles that have blunted the power of Israel's once invincible armour.

After one of the fiercest confrontations of the war, Israeli forces took the small town of Ghandouriyeh, east of the southern city of Tyre, on Sunday evening, hours before a ceasefire brokered by the United Nations took effect.

...Outside one of the town's two mosques a van was found filled with green casings about 6ft long. The serial numbers identified them as AT-5 Spandrel anti-tank missiles. The wire-guided weapon was developed in Russia but Iran began making a copy in 2000.

Beyond no-man's land, in the east of the village, was evidence of Syrian-supplied hardware. In a garden next to a junction used as an outpost by Hizbollah lay eight Kornet anti-tank rockets, described by Brig Mickey Edelstein, the commander of the Nahal troops who took Ghandouriyeh, as "some of the best in the world".

Written underneath a contract number on each casing were the words: "Customer: Ministry of Defence of Syria. Supplier: KBP, Tula, Russia."

KBP is no stranger to US sanctions -- the State Department has imposed them on the Russian firm on at least four occasions in the past seven years (1999, 1999x2, 2002, and 2003), most recently for allegedly supplying antitank weapons to Iraq in the run up to the 2003 US invasion. KBP denied that accusation, but has acknowledged selling both Kornet and Metis antitank missiles to Syria (which is what triggered the first round of US sanctions). These ATGMs, along with another Russian-made munition, the RPG-29, are believed to have accounted for the bulk of Israel's military casualties in its latest war with Hezbollah.

Ney Tried to Help Cypriot Firm Get License for Iran Export

Thanks to Newsweek (via Josh Marshall), the heretofore elusive House Republican ethics scandal-export controls connection is coming into focus:

Ohio Rep. Robert Ney personally lobbied the then Secretary of State Colin Powell to relax U.S. sanctions on Iran. Who asked him to? A convicted airplane broker who had just taken the congressman and a top aide on an expense-paid trip to London, NEWSWEEK has learned. Ney's lawyer confirmed to NEWSWEEK that federal prosecutors have subpoenaed records on Ney's February 2003 trip paid for by Nigel Winfield, a thrice-convicted felon who ran a company in Cyprus called FN Aviation. Winfield was seeking to sell U.S.-made airplane spare parts to the Iranian government—a deal that would have needed special permits because of U.S. sanctions against Tehran.

Winfield never got the license, but things worked out better for Ney himself. On a subsequent gambling outing with Winfield's business partner the Ohio congressman just happened to parlay $100 into $34,000 in winnings. Quite a coincidence considering the $30,000 in credit card debt Ney carried at the time.

We've been down this road before here at ECB, but by way of a quick summary -- a license is required to export most anything of US origin to Iran, including aircraft parts. Most of the time, the mandarins at the Office of Foreign Assets Control review applications for exports to Iran under a policy of denial. (Note to Newsweek: if you had contacted the agency with primary jurisdiction over the Iran sanctions rather than Commerce and State perhaps someone would have been able to comment.) But there are a few categories of prospective transactions which get an upgrade to case-by-case review. Such is the case with exports related to aircraft safety, or, as the Iranian Transactions Regulations put it:

Specific licenses may be issued on a case-by-case basis for the exportation and reexportation of goods, services, and technology to insure the safety of civil aviation and safe operation of U.S.-origin commercial passenger aircraft.

Some claim that OFAC is capricious in its application of this provision, favoring suppliers to particular airframe manufacturers. What's clear enough is the OFAC does issue licenses under the aircraft safety carve-out, as in this case from 1999:

The Clinton Administration has approved a license to allow Boeing, through a European intermediary, to provide aircraft parts to Iran Air. After a painstaking review, the administration agreed to grant a waiver for the export and approve the license because the parts are necessary to ensure the safety of seven Iran Air 747s. According to State Department spokesman James P Rubin, "The American government seeks to ensure safe air travel for citizens of all nations. This waiver should not be viewed in terms of political content or messaging."

In October 1992, an El Al cargo jet crashed when two engines fell off its wing. That crash killed over 50 people. Following the crash the FAA (and its European counterpart) ordered modifications to 747s to prevent the engines from falling off. The modifications require that a special kit be installed to modify the struts used to attach engines to the wings of 747s. The Clinton Administration crafted its approval to ensure that the kits are installed on seven known passenger 747s operated by Iran Air and to prevent the kits from being installed on cargo aircraft.

Here's a bit of unsolicited career counseling for Rep. Ney. When you eventually resign in disgrace, send your resume on over to former Attorney General John Ashcroft's eponymous consulting firm. He's already lobbying on behalf of an Israeli defense company looking to reexport some US technology to South Korea, so I'm sure he'd be thrilled to bring someone on board with your experience. And what better way for a high-class outfit like the Ashcroft Group to hedge its bets than to lobby for both Israeli concerns and the country whose president would like to see them "wiped off the map"? (Just make sure you get a retainer.)

Export, etc. 1/6/06

• Julie Myers, late of BIS, gets a recess appointment to ICE
• Iran scrounging for nuke tech in Europe (via Sudan?)
• OFAC resumes publication of civil penalty info
• DDTC website on the move
• British MP says EU China embargo here to stay
• An Indian argues against US-India nuclear cooperation
• So that's what Ashcroft's doing these days
• BIS head McCormick to speak in California Jan. 12
• Finns mystified by Dell compliance efforts: "What in the world is this all about?"

Export, etc. 12/23/05

• Political prisoner's brother slams US Libya policy
• As baseball reapplies for license from OFAC, Puerto Rico may refuse to host in protest of initial exclusion of Cuba (check out Ivo Daalder on this, here too)
• Canucks strengthen nuclear export controls
• India's foreign secretary defends nuclear deal with US (transcript (pdf); also Jeffrey Lewis)
• "China things"
• Syrian official blusters about self-sufficiency
• Israel Aircraft Industries hires export control lobbyist
• Most lowbrow AECA case ever
• North Koreans pull out of Macau
• Get your Hugo Chavez action doll before the feds announce an embargo

What Would Maimonides Do?

I can't believe I almost overlooked this softball:

The U.S. Department of Commerce today announced that Epstein, Edell, Shapiro, Finman & Lytle LLC of Rockville, Maryland, agreed to pay a $17,000 civil penalty to settle allegations that it violated the antiboycott provisions of the Export Administration Regulations (EAR).

The Commerce Department's Bureau of Industry and Security (BIS) alleged that in February of 2002, in connection with transactions involving the transfer of information from the United States to Syria, Epstein furnished prohibited information about another person's business relationships with Israel in violation of the EAR.

So a law firm called Epstein, Edell, Shapiro, Finman & Lytle stands accused of cooperating with the Arab boycott of Israel.  Guys, listen up.  I'm not sure about Lytle, but the rest of you are going to have some explaining to do at the monthly Brotherhood bagel brunch.  And I don't want to belabor the point, but let's just say that this is not the sort of activity that will get your name in the program for the next Israel Bonds dinner.

What a shanda.