20-0909 Wednesday “Daily Bugle”

20-0909 Wednesday “Daily Bugle”

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Wednesday, 9 September 2020

(No items of interest posted) 

  1. Items Scheduled for Future Federal Register Edition
  2. Commerce/BIS: (No new postings)
  3. State/DDTC: (No new postings)
  1. EU Sanctions: “US BIS Imposes $55k Penalty on Zeiss”
  1. Steptoe: “BIS Undersecretary Affirms USD 31.4 Million Penalty on Singaporean Company for Iran Sanctions Violations”
  2. UK Finance: “Cuba Sanctions and Helms Burton Title III”
  1. FCC Academy Presents 3 Webinars: The ABC of FMS | Designing an ICP | Implementing an ICP
  1. Bartlett’s Unfamiliar Quotations 
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* Treasury/OFAC; NOTICES; Blocking or Unblocking of Persons and Properties; [Pub. Date: 10 Sep 2020]

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OGS_a22. Commerce/BIS: (No new postings)

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(Source: EU Sanctions, 8 Sep 2020)
The New York subsidiary of Zeiss, a German optical systems manufacturer, has reached an agreement with the US Commerce Department’s Bureau of Industry and Security to pay $55,000 to settle allegations that it committed 10 violations of the US Export Administration Regulations. Between December 2014 and July 2015, Zeiss exported rifle telescopes, with an estimated value of $889,170, to Canada without the required licence. The Order says that Zeiss knew or had reason to know that a licence was required for these exports because Zeiss had previously applied for and had been granted a BIS licence for similar exports. See here for the Order, Settlement Agreement and Charging Letter.


(Source: Steptoe, 8 Sep 2020)
* Principal Author: Wendy Wysong, Esq., 852-3729-1804, Steptoe
On August 25, 2020, the U.S. Department of Commerce’s Bureau of Industry and Security (“BIS”) published a final decision by the Undersecretary, affirming an Administrative Law Judge’s (“ALJ”) imposition of a US $ 31.4 million civil monetary penalty on Nordic Maritime Pte. Ltd., a Singapore-based marine seismic company, and its chairman (together, the “Respondents”), for knowingly exporting highly controlled equipment to Iran. This final decision follows the Undersecretary’s previous decision vacating and remanding the initial penalty as disproportionate to that imposed in similar cases (“Remand Order”). Our previous blog post discussing this unusual action is available here.
By way of background, the ALJ, in his initial recommended decision and order (“RDO”) dated February 7, 2020, found the Respondents liable for violating the Export Administration Regulations (“EAR”), and recommended a civil monetary penalty of US $ 31.4 million. The Respondents then appealed the ALJ’s decision to the Undersecretary, whose first decision, including the Remand Order, was published in March 2020. In that decision, the Undersecretary affirmed the ALJ’s findings on liability, but vacated the penalty and remanded it back to the ALJ for reexamination because the “analysis of damages in the RDO [was] incomplete.” The Undersecretary also listed a number of cases settled with proportionally lower penalties to guide the ALJ on remand. The ALJ then ordered additional briefing focused on the penalty amount, and reinstated the original penalty with a fuller justification in a subsequent RDO dated July 15, 2020. The Undersecretary affirmed the US $ 31.4 million civil monetary penalty in its entirety.
The development of this case provides a helpful insight into the administrative enforcement process in US federal agencies. US federal agencies that have enforcement capabilities, like BIS, appoint ALJs to conduct hearings in administrative enforcement proceedings. In this regard, a respondent is generally prevented from appealing an agency decision to a federal court for judicial review until it has exhausted its administrative remedies. Thus, Nordic Maritime had to appeal the ALJ’s decision to the Undersecretary before appealing to the courts.
In the present case, it is likely that the Undersecretary had made the Remand Order in order to ensure that the unusually high civil monetary penalty would survive scrutiny in a federal court. Indeed, although the Undersecretary, in his Remand Order, stated that “there appears to be little precedent for a civil monetary penalty like the one given here,” in his final decision on August 25, he analyzed a string of settled and litigated cases before deciding that “cases of this nature – involving shipments to an embargoed country of sensitive National Security-controlled items, with knowledge and involvement of company leadership, and then lying to law enforcement about it – warrant high penalties, including the imposition of up to the maximum penalty.
Of note, the Undersecretary distinguished the present case from previous cases with proportionally lower penalties which also involved intentional violations, by highlighting that the presence of “the combined degree of aggravating factors” in this case — reexport of seismic survey equipment to an embargoed destination (Iran), knowledge of the reexport, and false and misleading statements to BIS in the course of the investigation — made the Respondents’ conduct “far more harmful to the national security interests of the United States.

(Source: UK Finance, 8 Sep 2020)
The US sanctions programme against Cuba is the longest standing, and one of the most comprehensive and complex programmes that international banks manage. With the EU being Cuba’s largest trading partner, this could cause significant compliance challenges for European banks.
Cuban sanctions are maintained under a number of statutes and a code of federal regulations (CFR 515). This blog looks at the Cuban Liberty and Democratic Solidarity (LIBERTAD) Act of 1996, more commonly known as the Helms-Burton Act. The act has four key sections, one of which – Title III – had been waived since implementation and thus never fully enacted, a state which changed under the Trump administration when they ceased the Title III waivers in May 2019.

Title III allows claims against “any persons” that traffic in property owned by a US national which was confiscated by the Cuban government on or after January 1 1959, as long as the “amount in controversy” exceeds $50,000. Title III was waived by Bill Clinton when it was introduced, a status maintained by every administration since.

Helms-Burton has been widely criticised and led to the European Union introducing the EU Blocking Regulation (2271/96) to protect EU companies and individuals against extra-territorial claims that could be filed under the act. More recently, the EU updated the Blocking Regulation when the US withdrew from the Joint Comprehensive Plan of Action (JCPOA).
On 17 April 2019, Secretary of State, Michael Pompeo, announced that the Trump administration  would no longer sign the waiver for Title III, allowing it to become live for the first time on 2 May 2019.
By its first anniversary in May 2020 25 law suits against 51 companies had been filed. Amazon, Expedia, Iberostar, MasterCard, NH Hotels, Pernod, Royal Caribbean, Trivago and Visa are just some of the companies that have been subject to claims.
The base damages follow a prescriptive format and they use the greater of:
  • the current market value of the confiscated property;
  • the market value of the property when confiscated, plus interest;
  • if the claim is certified by the Foreign Claims Settlement Commission (FCSC), that amount is used, plus interest.
Title III can lead to significant exposure for trafficking [FN/1] as the claim may enable the claimant to recoup the entire value of the property plus interest, not just compensation based on the defendant’s benefit from the property in question.
For example, the claim against Carnival Cruise Lines is based on the company’s use of a pier which was confiscated in 1959. The claim is for the value of the pier plus interest, which means Carnival is facing a claim of $9 million plus 60 years compound interest (interest is set at six per cent by the FCSC), and the possibility of being hit with treble damages [FN/2] which could amount to a sum in excess of $800 million. This is despite Carnival only using the pier since 2016.
Title III is also specific for the plaintiff; in that they must be an American citizen and they must demonstrate that the defendant “knowingly trafficked” [FN/3] in property that was confiscated. Section 302 part 4 sets out that the plaintiff must have had a claim on the title of the confiscated property before the Act was enacted. It also states that for any properties confiscated after the enactment, the claimant has to have owned the property before it was confiscated. Section 305 also sets out that if the trafficking has ceased, then any claim must be brought within two years of the trafficking ceasing.
After being live for only just over a year, Helms Burton Title III cases are still in their early stages and we will see how they progress. There are problems with the clauses on timing of ownership causing an issue for inheritance. Some of the early cases, such as the Amazon/Cuban Charcoal case, have been dismissed due to issues around ownership and also the level of proof required to show that the defendant was “knowingly trafficking” in confiscated property.
[FN/1] Trafficking is defined in section 4(13) and includes knowingly and intentionally benefitting from a confiscated property without the authorisation of a US national that holds a claim on the property.
[FN/2] Under section 302 (3)(C)(ii) the penalty can be three times the amount determined applicable under paragraph (1)(A)(i).
[FN/3] Knowingly being defined as “with knowledge or having reason to know” under section 4(9


The ABC of Foreign Military Sales (FMS)
Tuesday, 29 September 2020

More Info

Designing and Implementing
an ICP
Tuesday, 6 October 2020 More Info
Wednesday, 7 October
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EN_a18. Bartlett’s Unfamiliar Quotations

(Source: Editor)


* Cardinal Richelieu (Cardinal Armand Jean du Plessis, Duke of Richelieu; 9 Sep 1585 – 4 Dec 1642), was a French clergyman and statesman.)
  – “If you give me six lines written by the hand of the most honest of men, I will find something in them which will hang him.”
  – “Secrecy is the first essential in affairs of State.”    
* Leo Tolstoy (Count Lev Nikolayevich Tolstoy (9 Sep 1828 – 20 Nov 1910; was a Russian writer who is regarded as one of the greatest authors of all time. He received multiple nominations for the Nobel Prize in Literature every year from 1902 to 1906 and nominations for Nobel Peace Prize in 1901, 1902, and 1910, and the fact that he never won is a major Nobel prize controversy. He is best known for his novels War and Peace and Anna Karenina.)
  – “If you want to be happy, be.” 
  – “The truth is that the State is a conspiracy designed not only to exploit, but above all to corrupt its citizens.”
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(Source: Jim Bartlett, Daily Bugle Editor)
  Your analysis and commentary on a current trade issue can generate new clients from among the Daily Bugle’s subscribers (over 10,000 world-wide). We receive far more articles every day from law firms and consultants than we can publish, but if you would like have your article published, please contact Jim Bartlett at 1-202-802-0646 or JEBartlett@JEBartlett.com.
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The official versions of the following regulations are published annually in the U.S. Code of Federal Regulations (C.F.R.), but are updated as amended in the Federal Register.  The latest amendments are listed below.
Latest Update 


5 Apr 2019: 84 FR 13499:

Civil Monetary Penalty Adjustments for Inflation. 
27 Aug 2020: 85 FR 52898Additions of Entities to the Entity List and Revisions of entries on the Entity List.

DOC FOREIGN TRADE REGULATIONS (FTR): 15 CFR Part 30.   24 Apr 2018: 83 FR 17749: Foreign Trade Regulations (FTR): Clarification on the Collection and Confidentiality of Kimberley Process Certificates.  

: DoD 5220.22-M. Implemented by Dep’t of Defense. 

18 May 2016: Change 2: Implement an insider threat program; reporting requirements for Cleared Defense Contractors; alignment with Federal standards for classified information systems; incorporated and cancelled Supp. 1 to the NISPOM (Summary here.)  
DOE ASSISTANCE TO FOREIGN ATOMIC ENERGY ACTIVITIES: 10 CFR Part 810.    23 Feb 2015: 80 FR 9359: comprehensive updating of regulations, updates the activities and technologies subject to specific authorization and DOE reporting requirements. 

15 Nov 2017, 82 FR 52823: miscellaneous corrections include correcting references, an address and a misspelling.

DOJ ATF ARMS IMPORT REGULATIONS: 27 CFR Part 447-Importation of Arms, Ammunition, and Implements of War. 
14 Mar 2019: 84 FR 9239: Bump-Stock-Type Devices.


29 Jul 2020: 85 FR 45513 Extension to Certain Temporary Suspensions, Modifications, and Exceptions due to Corona Virus.  The latest edition of the BITAR is 29 July 2020.  

DOT FOREIGN ASSETS CONTROL REGULATIONS (OFAC FACR): 31 CFR, Parts 500-599, Embargoes, Sanctions, Executive Orders
Inflation Adjustment of Civil Monetary Penalties Related to Reporting and Recordkeeping.

1 Jan 2019: 19 USC 1202 Annex.
  – HTS codes for AES are available here.
  – HTS codes that are not valid for AES are available here.

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