Archive for the ‘Arms Export’ Category

Aug

26

Export Licenses For Radar Sales to Taiwan Complicate US-China Relations

Posted by Clif Burns at 8:51 pm on August 26, 2010
Category: Arms Export • China

Chinese Military PosterThere was an interesting colloquy on Tuesday during the State Department’s daily press briefing. After Assistant Secretary Philip Crowley announced the approval of export licenses to permit sale of military radar systems and components to Taiwan, one reporter asked what China’s reaction would be to the sale. China, of course, objects to all military sales to Taiwan, but Crowley dodged the question, saying ” I’ll let China react to this as they see fit.”

QUESTION: Just a quick one. As far as this – the Pentagon report to Congress on China, how much concern do you have as far as Chinese military buildup?

MR. CROWLEY: Well, it is a – it is something that we watch closely. It’s something that other countries in the region watch closely. We would like to have a fuller military-to-military relationship and dialogue so that we can better understand China’s long-term military plans, and that is something that we continue to seek.

What Crowley doesn’t mention is that it was China that cut off military-to-military contact between the U.S. and China last January after the last announcement of U.S. arms sales to Taiwan. These new sales aren’t likely to change the situation.

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Jul

13

DTAG Proposes a New Spare Parts Exemption

Posted by Clif Burns at 8:52 pm on July 13, 2010
Category: Arms Export

Spare PartsThe website for the Directorate of Defense Trade Controls (“DDTC”) recently posted the reports of three Working Groups for the Defense Trade Advisory Group (“DTAG”). DTAG is an industry-advisory group set up by DDTC to consult with the agency on regulatory issues important to the export sector of the defense industry.

The report of Working Group #2 details a proposed new exemption for export of spare parts to foreign government end users of defense articles previously approved for export. Under the current exemption for spare parts, found in section 123.16(b)(2) of the International Traffic in Arms Regulations, the exemption for spare parts is limited to individual shipments of less than $500 and a maximum of 24 such shipments per year, with a provision that orders cannot be split to avoid exceeding these limits. These shipments can be made to government and non-government end users provided that the parts are for a defense article previously approved for export.

Working Group #2′s proposed exemption, which would be inserted into the ITAR as section 123.28, would only apply to foreign-government end users and not to private end users. Although the proposed exemption would eliminate the value and shipment caps in the existing exemption, it includes a number of other significant restrictions

  • The exemption is available only to the original exporter and the original government end-user.
  • The parts will not provide an upgrade to the capabilities of the defense article as originally exported.
  • The parts must be of a type and quantity consistent with normal logistical support.
  • The exporter must use only the United States Postal Service, freight forwarders registered with DDTC and customs brokers licensed by the U.S. Customs Service.

I’m not sure what is meant by freight forwarders registered with DDTC. The current broker registration requirements under Part 129 of the ITAR exempt freight forwarders from registration requirements under that part. Perhaps the Working Group is hinting at some independent registration requirement for freight forwarders handling ITAR exports. Although that is not currently required, given the dismal ITAR compliance record of freight forwarders, there is much to commend some system of regulating freight forwarders that handled ITAR-controlled exports.

The larger question here is where all this would fit in the current export reform initiative. Will the new system adopt a uniform exception that looks like the RPL license exception of the Bureau of Industry and Security (“BIS”). That exception is limited to one-to-one exports. Or will the reforms lift the value limits imposed by DDTC on shipments to all users? Although DTAG’s work here is laudable, it might be rendered moot by the proposed export reforms.

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Jul

9

Arms Export Charges Added to Mac Aviation Indictment

Posted by Clif Burns at 9:19 am on July 9, 2010
Category: Arms Export • Criminal Penalties • Iran Sanctions
Oyster Bay Pump Works
ABOVE: Thomas McGuinn

This blog previously reported on the indictment of three Irish residents — Tom McGuinn, his son Sean McGuinn, and Sean Byrne — and their company Mac Aviation for exports of helicopter engines from the United States to Iran. The defendants allegedly had the engines shipped from the United States to Mac Aviation in Ireland and then re-exported them to Iran.

Now comes news of a superseding indictment in that case with new charges against the defendants. Most significantly, the superseding indictment now alleges that the defendants bought F-5 canopy panels in the United States and then exported them to Iran. Based on these allegations, the superseding indictment adds for the first time counts for violating the Arms Export Control Act.

The significance here is that these charges may make it easier to extradite the defendants from Ireland because these exports violate current U.N. sanctions and would (at least presumably) violate Irish law, whereas the helicopter engine exports likely were legal under Irish law. The only problem here is that the F-5 canopy panel exports occurred in 2005. This was before U.N Security Council Resolution 1747 which imposed the international arms embargo on Iran in 2007.

The story told by the superseding indictment about how McGuinn and company got the canopy panels out of the U.S. is both interesting and a little unclear. McGuinn allegedly purchased the panels from a California company and told the company that the panels were going to the Nigerian Air Force. The California company naturally refused to sell the panels to McGuinn without an export license authorizing the panels to go to Nigeria. McGuinn then, according to the indictment, asked the California company to ship the panels to a representative of McGuinn’s freight forwarder in the United States, something the California company also declined to do without an export license. (Obviously, the California company had undergone good compliance training on export red flags!)

Now comes the interesting part. According to the indictment:

[D]efendant MAC AVIATION caused a representative of ABL freight, located in Compton, California, to remove all attached invoices from [the California company] from the F-5 forward canopy panels, and replace them with a Packing List and Proforma Invoice on defendant MAC AVIATION letterhead addressed to “Microset Systems Sdn Bhd,” Free Commercial Zone, Southern Zone, Kuala Lumpur, Malaysia for three (3) Plastic Panels, Part Number 3-13204-01, Serial Numbers 2146, 2149, and 2150.

The packages were then shipped by ABL to Malaysia and, thereafter, McGuinn allegedly had them shipped on to Tehran.

It’s not clear who ABL is. Probably they are the California company’s freight forwarder. How MacGuinn got ABL to change the packing information and then ship the panels is even more unclear, although if that happened, my guess would be that some improper financial incentives to some ABL employee was involved. The panels had either been consigned to an ABL facility pending the licenses or the ABL employee had access to the California company’s parts warehouse. This part of the export scenario, if true, would also increase the likelihood of extradition from Ireland by strengthening the claims of U.S. jurisdiction over McGuinn who, it would appear, engaged in substantial activities in the United States in order to avoid the U.S. requirement for an export license.

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Jul

1

Export Reform: A Return to Original Intent?

Posted by Clif Burns at 9:50 pm on July 1, 2010
Category: Arms Export • Export Reform
Richard Bistrong
ABOVE: Gen. James Jones

Yesterday’s post mentioned a speech given by National Security Advisor General James Jones to the Senate Aerospace Caucus. I’ve now had a chance to look at a text of his speech as prepared and noticed at least one part that may be of considerable interest to exporters.

General Jones begins his speech with, and mentions throughout, some significant changes that have occurred since our current export control regime was initially instituted. Most striking was his observation that when we first started controlling exports troops were moved around on trains and that, notwithstanding that military trains have gone the way of camels, horses and elephants as a mode of troop transport, “military railway trains” are still mentioned in USML Category VII.

More significantly, General Jones mentions this difference:

“Specifically designed for military use” – a term still used in our munitions controls today – meant what it says: items were intended only for military use having little or no civilian use.

My frisson of delight at that phrase — “‘specifically designed for military use’ meant what it says” — was probably counterbalanced by the grinch-like scowls it would have provoked at the Defense Technology Security Administration (“DTSA”).

The folks at DTSA have been the chief proponents at the Department of Defense for the notion that the phrase doesn’t mean what it says, that it instead means that an item, regardless of why it was designed, could be used for military purposes. DTSA has continued to champion that interpretation of “specifically designed” during the classification process even though it is so broad that virtually everything — from the flat panel TV in your living room to the toilet plunger in your bathroom — could be used for military purposes and therefore are properly classified as USML items.

Supplications to the deity of your choice that “specifically designed” is returned to its original meaning as part of the current export reform efforts would not be out of place.

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Mar

3

Global Recession Hits Criminal Arms Merchants Too

Posted by Clif Burns at 9:38 pm on March 3, 2010
Category: Arms Export • Criminal Penalties
Monzer al-Kassar
ABOVE: Monzer al-Kassar

An article that I just noticed in the February 8 issue of The New Yorker, tells the fascinating story of a D.E.A. sting operation conducted in Spain against Monzer al-Kassar, the notorious arms dealer alleged to have sold weapons both to the Achille Lauro terrorists and to the United States as part of the Iran-Contra affair. Kassar was arrested in Spain, extradited to the United States, and convicted in a Manhattan court to thirty years in prison on charges that he conspired to sell arms to FARC, a paramilitary terrorist group in Colombia.

The whole story is worth reading, but several details in the article are of particular note. First, the article emphasizes that arms dealers can be elusive because they structure their deals to comply with the laws of the countries in which they reside, negotiating sales from one country to another without ever leaving their home base where the brokering transactions are perfectly legal.

Second, and I know this will come as a shock, corrupt countries readily sell end-user certificates to arms dealers and certain arms manufacturers don’t even bother to read the end-user certificates that they demand. In one instance, Kassar bought weapons using an end-user certificate from the People’s Democratic Republic of Yemen even though the DPRY had ceased to exist two years earlier when North and South Yemen reunited. One of the D.E.A. undercover agents almost blew his cover when he told Kassar that the Nicaraguan end-user certificate to be used in the FARC transaction had cost several million dollars.

Kassar scoffed, saying that with that kind of money he “could have bought a whole country.”

Third, Kassar was caught because he abandoned his ordinary caution and allowed himself to be taped agreeing to sell arms that the undercover agents told Kassar would be used by FARC to kill Americans. As the reporter for the article stated:

Everyone I spoke to who has worked with Kassar over the years expressed surprise that someone so cautious could be caught on tape agreeing to sell weapons to the FARC. One possible explanation is that, compared with the last decades of the twentieth century—when conflicts in Africa, Europe, and the Middle East generated steady revenue—these are difficult times for weapons traffickers. When Samir first approached Tareq al-Ghazi in Lebanon, Ghazi told him that Kassar had been struggling to maintain his profit margins.

A diminished demand for black-market weapons may be driving other arms traffickers to assume risks that they would never have taken in the past. A year after the capture of Kassar, the S.O.D. team arrested Viktor Bout, the Tajik arms dealer, in Bangkok—using the same sting. (Bout asserts his innocence, and, to date, the Thai government has refused to extradite him.)

Kassar maintains his innocence and continues to insist that he was playing along with the D.E.A undercover agents in order to turn them in to Spanish authorities.

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