International Trade Law News

The Emirates News Agency reported today that the United Arab Emirates Government approved the formation a "committee on the commodities subject to import-export control" to "cooperate and coordinate with the relevant authorities on the regulations relating to import and export, to study proposals by such authorities on prohibiting, excluding or restricting any commodity."

The Committee will also be responsible for preparing "a set of proposals on the procedure, provisions and fees for import or export licenses for such commodities."

In August 2007, the UAE enacted a new import and export control law. The law, known as Federal Law No. 13 of 2007, authorizes the UAE "to ban or restrict the importing, exporting or re-exporting of any commodity for reasons related to safety, public health, environment, natural resources, national security or for reasons related to the UAE's foreign policy."

During the past few years the U.S. has placed pressure on the UAE to strengthen its export control regime and there have been efforts underway in Congress to include the UAE as a "Destination of Possible Diversion Concern."

Labels: Export Controls, UAE

Thursday's Wall Street Journal contains an extensive story entitled "Oil-Rich Arab State Pushes Nuclear Bid With U.S. Help" on the United Arab Emirate's (UAE) efforts to build a commercial nuclear power facility and the upcoming debate in Congress on the Agreement for Cooperation Concerning Peaceful Uses of Nuclear Energy (123 Agreement) that the U.S. and the UAE signed in January of this year.

The article also discusses concerns over the UAE's involvement in Iran's nuclear program and its reputation as a diversion risk. For example, the article notes that:

Most critics of the program, including some U.S. lawmakers and nonproliferation experts, believe the U.A.E. is unlikely to turn to nuclear weapons. But they have reservations about the country's past role in the flow of sensitive military technologies. The rogue Pakistani scientist Abdul Qadeer Khan used the port of Dubai to transfer centrifuge technologies to countries like Libya, according to American and U.N. officials. Mr. Khan's network grew to include nuclear sales to North Korea and Iran, before American and international investigators shut him down in 2003.

Iran has allegedly obtained materials for its missile program from front companies based in Dubai. Iran and the U.A.E. are trading partners, exchanging more than $5.5 billion in goods in 2007, according to the European Union.

With respect to export controls, the article indicates that UA.E. officials have admitted that they have been "lax in monitoring the flow of sensitive technologies" through its ports but that "enforcement of U.N. sanctions against Iran and tightened business-license regulations for Iranian nationals" has occurred. The article also indicates that during the past three years "U.A.E. officials say, they have shut down 40 Iranian companies operating in Dubai over either export-control violations or lack of proper licenses. In the past six months, Emirati authorities have also blocked more then 10 shipments of goods for potential military use heading to Iran through Dubai, largely from Asia."

Labels: Export Controls, UAE

The U.S. and United Arab Emirates (UAE) today signed an Agreement for Cooperation Concerning Peaceful Uses of Nuclear Energy pursuant to section 123 of the Atomic Energy Act of 1954 (42 U.S.C. 2153). The remarks from today's signing ceremony can be found here.

The following is the text of the UAE's position on nuclear and other export controls from the Policy of the United Arab Emirates on the Evaluation and Potential Development of Peaceful Nuclear Energy:

With regard to control of trade, the UAE will continue to strengthen its export control regime to block and respond effectively to illicit trade of nuclear material or equipment. To this end, the UAE will implement commitments under the NPT, the IAEA Convention on the Physical Protection of Nuclear Material and the IAEA
Joint Convention on the Safety of Spent Fuel Management and on the Safety of Radioactive Waste Management. As a means of ensuring the establishment and maintenance of the most comprehensive and up-to-date export control regime, the UAE will seek to participate in the Nuclear Suppliers Group (NSG) and implement import and export control rules for nuclear and nuclear-related equipment and technology in strict accordance with NSG Guidelines for Nuclear Transfers. In connection with the broader need to regulate trade, the UAE has recently established, under Federal Law No. 13 of 2007, a legal regime for commodities that are subject to import and export control procedures. Included within the scope of the law is a list of export-controlled technologies addressing nuclear materials, technologies and equipment.

Representative Ileana Ros-Lehtinen (R-FL), the ranking member of the House Foreign Affairs Committee, which must approve the 123 Agreement, last week introduced the Limitation on Nuclear Cooperation with the United Arab Emirates Act of 2009 (H.R. 364) that would impose a number of restrictions on the export of nuclear material, equipment or technology to the UAE until the UAE Government takes action to prohibit and prevent the transfer of goods, services, or technology to the Government of Iran.

In order for the U.S. to engage in civilian nuclear cooperation with other nations, it must conclude a framework agreement that meets specific requirements under section 123 of the Atomic Energy Act. Congressional review is required for section 123 agreements.

Labels: Export Controls, UAE

On December 9th, Representative Ileana Ros-Lehtinen (R-FL), the Ranking Member of the House Committee on Foreign Affairs, introduced the Limitation on Nuclear Cooperation with the United Arab Emirates Act of 2008 (H.R. 7316), a bill that would impose conditions on the proposed agreement between the U.S. and the United Arab Emirates (UAE) for the Cooperation on Peaceful Uses of Nuclear Energy (commonly known as a "123 Agreement").

Section 3(c) of H.R. 7316 requires the President to certify to Congress that the UAE has met a number of stringent conditions before the 123 agreement could be enacted or before any licenses are issued for the export of nuclear material, equipment or technology to the UAE.

Among other things, the President would have to certify that the UAE Government has:

• Taken effective actions to prohibit, terminate, and prevent the transfer of goods, services, or technology to the Government of Iran, including fully implementing United Nations Security Council sanctions against Iran.

• Developed and fully implemented an export control regime in accordance with international standards.

• Developed and implemented the appropriate or necessary legislative and functional actions to target the logistical and financial networks that support terrorist organizations.

• Not violated the Iran Sanctions Act of 1996, the Iran, North Korea, and Syria Nonproliferation Act and other provisions of applicable U.S. law.

This bill will not be considered during the remaining days of the 100th Congress, but will certainly be reintroduced when the next session of Congress convenes on January 6, 2009. As indicated in the excellent report on this bill at the Global Security Newswire, this bill was introduced now since the U.S.-UAE 123 Agreement appears very close to being signed.

Labels: Export Controls, UAE

Yet another article has been published on the UAE's ties to Iran and U.S. efforts to prevent the diversion of U.S. products to Iran. Some excerpts from today's Associated Press article entitled UAE Cities at Odds Over Lifestyle, Ties to Iran":

But now Dubai's massive trade with Iran and liberal Western outlook are becoming liabilities for the U.S.-friendly capital of the UAE, Abu Dhabi, which is under pressure from Washington to isolate the Islamic republic.

* * *

With U.S. sanctions against Iran already in place and Washington threatening new penalties for Tehran's failure to curb uranium enrichment, Dubai is finding it more difficult to defend its lucrative commercial dealings with Iran's ruling elite.

Labels: Sanctions; Iran, UAE

The September issue of Conde Nast's Portfolio magazine contains an extensive article on the diversion of U.S. goods from Dubai to Iran. The article "Axis of Commerce", written by Christopher S. Stewart, discusses the wide availability of grey market U.S. consumer and other goods in Iran and the role that Iranians play in Dubai. Mr. Stewart's research for the article included a trip to Iran where he went inside stores searching for American products.

Some interesting excerpts:

Iranians have partnerships in about 9,500 businesses in the emirates . . . , the bulk of which are involved in exporting. Some are connected to the Iranian government and military. There are 450,000 to 500,000 Iranians living in the U.A.E., with three-quarters of them in Dubai. The number of Iranians in Dubai has almost doubled in the past five years, and they account for about a quarter of the city’s total population. Iranians here also have a lot of money—estimates run as high as $300 billion in assets. Many Iranians would not be in Dubai . . . if it weren’t for American policy.

* * *

What I learn in a week in Iran can be summed up in a conversation I have with an older man in a store selling H.P. printers.

“We like America,” the man tells me, “just not American politics.”

“But where does all this American stuff come from?” I ask.

“It comes from Dubai,” he says. “Everything.”

“But how does it get here?”

“Are you C.I.A.?”

* * *

Last year, the U.S. shipped almost $11.6 billion worth of goods to the U.A.E., the bulk of which went to Dubai. That’s a 230 percent increase over the past five years. Experts estimate that between 30 and 40 percent of those goods—$3 billion to $5 billion worth—are then exported, though there are no official numbers. Iran, meanwhile, has become the U.A.E.’s No. 1 trading partner.

Underlying the entire operation is an informal “Don’t ask, don’t tell” philosophy, focused on maximizing profits no matter what. Thanks to an almost perfect convergence of American and local business interests, this approach has essentially turned the emirate into a global center for sanctions-busting. Some exports are innocuous, like refrigerators and stoves; others, such as high-speed computer chips, military hardware, and nuclear components, are more ominous.

* * *

Earlier this year, the Government Accountability Office released “Iran Sanctions: Impact in Furthering U.S. Objectives Is Unclear and Should Be Reviewed,” a report that spotlighted transshipment in the U.A.E. as a “considerable problem.” President Bush later flew to Abu Dhabi and Dubai with a request that the U.A.E. reconsider its business dealings with Iran. While Bush issued a subtle warning, Stuart Levey, the U.S. Treasury undersecretary for terrorism and financial intelligence, was more direct. In Dubai last year, he told a group of bankers and executives, “Those who are tempted to deal with targeted high-risk actors are put on notice.”

Labels: Sanctions; Iran, UAE

The Justice Department announced last week that Air Shunt Instruments Inc., an aircraft components company located near Los Angeles, California, has been sentenced to pay a criminal fine of $250,000 for "willfully and knowingly" making "a false statement in connection with a gyroscope used on military helicopters that was sent to a freight forwarder in San Diego for shipment to Thailand in 2003."

Meanwhile, it was also reported that John Nakkashian, Air Shunt's former Vice President who was responsible for international sales and for obtaining all required export licenses remains, has fled the U.S. and remains a fugitive.

Nakashian was previously indicted on four counts of violating the Arms Export Control Act for illegally exported military components without the required export licenses. The indictment alleges that Nakkashian illegally exported military components for the General Electric J85 engine, which is used on the F-5 fighter jet, from the United States to Dubai without obtaining the required export licenses from the State Department's Directorate of Defense Trade Controls. Nakkashian is also accused of illegally exporting a military gyroscope to Thailand and other military component to Dubai.

The Justice Department's press release indicates that:

Air Shunt took appropriate disciplinary action against Nakkashian for perpetrating the acts alleged. Furthermore, since August 2004, Air Shunt has adopted effective standards of conduct and internal control systems, including new and revised review and control procedures and ethics training programs designed to prevent or detect violations.

Labels: DDTC, ITAR, UAE

Iran is obviously a hot topic these days. In addition to today's missile test, the widely distributed AP article on exports to Iran that was published yesterday and referenced at today's House Foreign Affairs Committee's hearing on U.S. Policy toward Iran, Mother Jones has published an article entitled "The Persian Paradox: Why is so much sensitive U,S. military technology winding up in Iran?"

The article, written by Laura Rozen, Mother Jones' national security correspondent and publisher of the widely read War and Piece blog, discusses the efforts by arms dealer Arif Durrani (who appears on BIS's Denied Person's List) and others to export and re-export U.S. military technology to Iran. The article notes:

The latest statistics on illegal US arms sales to Iran detected and compiled by investigators at the US bureau of Immigration and Customs Enforcement (ICE), now part of the Department of Homeland Security, read like the basis of a spy novel. The story they tell raises many questions.

On the one hand, they tell a colorful if familiar story of wily arms dealers in the gray- and black-market world from the likes of Pakistan, Iran, Israel, and China, with beachheads in places including California, Mexico, South Africa, and Dubai. In this world, dealers recruit former US military and intelligence officials to help them export restricted US military technology—ostensibly to neutral third countries—knowing full well the final destination is actually sanctioned countries for such exports, such as Iran.

The article also describes U.S. efforts to get a handle on the problem.

Editors Note: Full disclosure - I am quoted in the article.

Labels: Sanctions; Iran, UAE

The United Arab Emirates (UAE) announced today that it has enacted a new law governing the import and export of goods.

The new law, entitled Federal Law No. 13 of 2007, authorizes the UAE "to ban or restrict the importing, exporting or re-exporting of any commodity for reasons related to safety, public health, environment, natural resources, national security or for reasons related to the UAE's foreign policy."

According to a summary of the law issued by the Emirates News Agency, the new law includes four chapters. Chapter 1 sets forth the general framework for the issuance of import and export licenses. Chapter 2 includes procedures aimed at controlling the import and export of strategic commodities, the export and re-export of technology, and provisions relating to the brokerage and transport of such items. Chapter 3 specifies the penalties for violating the law, ranging from a maximum imprisonment of one year and fines of 1 million UAE dirhams (approximately US$272,000). Chapter 4 provides that the UAE's Cabinet must issue relevant regulations and publish them in the UAE's Official Gazette within one month.

The new law also orders the establishment of the National Commission for Commodities Subject to Import, Export and Re-export Control. The National Commission, which will be chaired by the Ministry of Economy, will include representatives of other concerned federal ministries and bodies and the private sector. It will be tasked with "cooperating and coordinating with relevant authorities on the rules introduced to control imports and exports in compliance with the new law" and "will also provide technical advice to federal and local bodies to ensure the enforcement provisions" of the law are applied.

The U.S. has been pressuring the UAE to strengthen its export control regime. In February of this year, the Bureau of Industry and Security (BIS) published in the Federal Register an advanced notice of proposed rulemaking that would give BIS the authority to place certain countries in Country Group C, resulting in additional licensing requirement. The Dubai Chamber of Commerce and Industry, and eight other companies and organizations submitted comments on the proposed rule to BIS.

BIS has also taken other steps to prevent the transshipment of goods from the UAE to Iran through the issuance of General Order No. 3 on June 5, 2006. General Order No. 3 imposes a license requirement for exports and reexports of all items subject to the Export Administration Regulations (EAR) when the transaction involves companies in the UAE that the U.S. has determined is involved in the supply of electronic components and devices capable of being used to construct Improvised Explosive Devices (IEDs). General Order No. 3 was amended on June 8, 2007 to include additional parties located located in the UAE, Germany, Syria, Lebanon, Malaysia Iran and Hong Kong.

On June 5, 2006, BIS issued a General Order Concerning Mayrow General Trading and Related Entities. This Order imposes a license requirement for the export or reexport of any item subject to the EAR to Mayrow and other named entities. The Order, which does not permit the use of license exceptions, applies to any transaction involving Mayrow or any other named entity. The Order was amended in September 2006 and June 2007 to apply to additional persons.

BIS recently imposed a $36,000 penalty on Georgia-based Ace Systems, Inc. for attempting to export dialogic voice cards to Mayrow General Trading in Dubai, UAE without the required license. Mayrow General Trading was the primary subject of General Order No. 3 when it was issued in June 2006.

Labels: BIS, Export Controls, UAE