Source: http://www.exportlawblog.com/archives/date/2011/12
Timestamp: 2014-03-09 18:46:06
Document Index: 300249352

Matched Legal Cases: ['§ 515', '§ 515', 'art 129', '§ 120', 'art 122', 'art 122', 'art 122', 'art 129', 'art 129', 'art 129']

ExportLawBlog » 2011 » December
Posted by Clif Burns at 10:38 am on December 23, 2011 Category: OFAC A spokesman for the Treasury Department’s Office of Foreign Assets Control (“OFAC”) told Export Law Blog this morning that discussions between OFAC and the North Pole over Santa Claus’s Christmas Eve itinerary had broken down and were not expected to be resumed before Santa’s scheduled departure on December 24 at 10 pm EST. The dispute arose from a dilemma that the U.S. sanctions against Cuba posed for Santa’s planned delivery of toys to children in Cuba. If Santa delivers toys for U.S. children first, there will be toys destined for Cuba in the sleigh in violation of 31 C.F.R. § 515.207(b). That rule prohibits Santa’s sleigh from entering the United States with “goods in which Cuba or a Cuban national has an interest.” On the other hand, if Santa delivers the toys to Cuban children first, then 31 C.F.R. § 515.207(a) prohibits the sleigh from entering the United States and “unloading freight for a period of 180 days from the date the vessel departed from a port or place in Cuba.”
This post is an annual tradition and appeared previously in 2007, 2008, 2009 and 2010 in slightly altered form. Export Law Blog would like to take the opportunity of this post to extend its best holiday wishes to all of its readers. Posting will be light between now and the end of the holidays.
Permalink Comments (2) Dec21 And It Just Gets Worse and Worse
Posted by Clif Burns at 5:24 pm on December 21, 2011 Category: DDTC • Part 129 On Monday we talked about the lump of coal the Directorate of Defense Trade Control (“DDTC”) is delivering to export lawyers for Christmas in the proposed new brokering rules that appear to require export lawyers to register as brokers and to get permission from DDTC to provide certain legal services to their clients. But the difficulties don’t stop there and extend to something of even more concern to exporters: their employees. Under the proposed rules, your employees are brokers, and all part-time and many full-time employees will all need to be registered as brokers, and you may need to get prior approval from DDTC before many of them can work on export projects.
Employees are not considered brokers under the current rules because the rules make clear that brokers are persons that provide brokering activities “as an agent for others.” Even under the absurdist position taken by certain DDTC employees that a subsidiary acting for a parent is acting “for others,” there was never even a peep from the agency that an employee working for a company might be working “for others” even though the employee and the company were legally distinct entities.
The new definition eliminates the requirement that a brokering activity be as “an agent for others.” It simply states:
Broker means any person (as defined by § 120.14 of this subchapter) who engages in brokering activities.
And brokering activities are simply defined as:
any action to facilitate the manufacture, export, reexport, import, transfer, or retransfer of a defense article or defense service.
The new section 129.2(e) provides some exemptions from the definition of brokering activities but the only “employees” exempted are U.S. government employees. The new section 129.2(e)(3) exempts certain clerical and administrative tasks from brokering activities and would cover some clerical and administrative employees. There is also an exemption of sorts for employees in the proposed section 129.3(b)(3) which states that “bona fide and full-time regular employees” of manufacturers registered under Part 122 of the ITAR (as manufacturers) are exempt from the requirement of registration and prior approval in two situations. This exemption does not cover part-time employees and does not clearly cover temporary employees working a full-time schedule. The two conditions may also be problematic for full-time employees. Those conditions to exemption from registration and prior approval are: brokering activities [which] (A) involve only such registered persons’ defense articles or defense services that are currently subject to an export approval under this subchapter obtained by the part 122 registrant or will require such an approval prior to their export, or (B) are on behalf of the part 122 registrant and involve only defense articles and defense services that are located and obtained from a manufacturer or source in the United States for export outside the United States under an export approval under this subchapter.
Both of these conditions require a prior export license, meaning that even full-time employees will need to be separately registered and obtain prior approval to work on the item to be exported if that work occurs prior to obtaining an export license.
What these convoluted new regulations mean are that non-clerical part-time and full-time employees working on items not yet approved for export will need to register and to obtain prior approval their employment by DDTC unless their involvement with exports fits within the narrow exemptions in the new section 129.7, which I discussed on Monday — e.g., NATO+4 only, FMS and non-SME equipment for foreign governments.
If this regulation stands as written, many manufacturers of defense articles might seriously consider whether it would be safer and easier for them to switch their production facilities to making some item over which DDTC has no arguable jurisdiction whatsoever, such as malted milk balls or shower curtain rings.
As a reminder, comments are due on February 17, 2012.
Permalink Comments (3) Dec19 DDTC Releases New Proposed Brokering Rules
Posted by Clif Burns at 11:58 pm on December 19, 2011 Category: DDTC • Part 129 The Directorate of Defense Trade Controls (“DDTC”) finally released its much anticipated (or dreaded, depending on your point of view) new proposed rules on brokering of defense articles and defense services. Although I intend to look at these proposed rules in more detail in subsequent posts, I wanted to talk first about one issue of particular concern to me.
Naturally I first looked at how the new rules handled export lawyers who provide advice to defense manufacturers. The language of the old rules was broad enough that arguably all export lawyers were brokers and needed to register under part 129 of the International Traffic in Arms Regulations (the “ITAR”) because brokering was defined to include any action that facilitated the manufacture or export of defense articles. Notwithstanding the breadth of that language, lawyers and law firms have not been registering under Part 129, using the well-accepted principal of statutory construction: hic lex non comprehendo mihi. And DDTC had not been rattling any sabers about their not registering. The proposed rule now specifically exempts “activities by an attorney that do not extend beyond providing legal advice to a broker.” This exemption would seem to require the conclusion that all export lawyers need to register unless they are only providing advice to brokers, although it’s hard to imagine this is what DDTC actually intends.
But it gets worse. Not only will law firms with export lawyers have to file a registration application and pay the annual registration fee, but they also will have to obtain prior approval from DDTC prior to providing many legal services to defense manufacturers. The new rules require prior approval for all brokering activities unless they are specifically exempted from that requirement in the new section 129.7, which exempts brokering (a) conducted for a government agency, (b) brokering of certain defense articles (excluding, for example, night vision) wholly within NATO countries, Japan, New Zealand, Australia or South Korea, or (c) brokering of defense articles that are not “Significant Military Equipment” (“SME”) for end use by foreign governments or international organizations. So, if a law firm provides advice to a defense manufacturer about exporting night vision to France, the law firm will need DDTC approval before providing that advice.
This, of course, is either pernicious policy or unbelievable sloppy drafting by DDTC. The agency takes great pains to exclude banks, insurance companies and freight forwarders from the scope of the new brokering rules but leaves them fully applicable to law firms and requires law firms to obtain agency permission to provide legal services. I cannot think of another instance (other than cases involving blocked parties) where federal agency permission is needed as a precondition to the provision of legal services to clients.
Comments are due on February 17, 2012.
Permalink Comments (4) Dec13 Call Kevin Wolf
Permalink Comments (1) Dec12 This and That
Posted by Clif Burns at 7:20 pm on December 12, 2011 Category: General Here are a few things worthy of your attention.
The ACI’s Second National EAR Boot Camp is coming up and will be held in Dallas on January 25 and 26, 2012. Export Law Blog readers who mention discount code EB200 will get a $200 discount on their registration fees. Download the promotional brochure here. There are some great speakers scheduled but you may want to go in particular to hear Gene Christensen from BIS. Gene knows as much about the EAR as anyone in BIS and is an all-round nice guy who shares his time freely to help out exporters dealing with his agency.
Speaking of nice guys, John R. Liebman, Roszel C. Thomsen II, James E. Bartlett III have just released United States Export Controls, Sixth Edition. John sent me an email describing the changes in the latest edition
The new edition is noticeably slimmer than its predecessors, primarily due to the consolidation of two chapters covering Commerce regulations into one and the deletion of several tables and appendices that were no longer useful (if they ever were). New chapters include the Foreign Corrupt Practices Act and its intersection with export controls. In addition, Roz, Jim and I are working on additional chapters that could not be completed before the publisher’s deadline, and those should be available in 2012, along with regular quarterly updates. Among them will be discussions of export control aspects of cloud computing, the Foreign Trade Regulations, and the ongoing efforts to overhaul the current patchwork of export regulations. Finally, this edition will be the first that is available electronically as well as in hard copy. There aren’t any special discounts for Export Law Blog readers, but the book is worth every penny even at full price.
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