Archive for the ‘DDTC’ Category


Mar

10

Maryland Pizza Shop Owner Pleads to Export Charges


Posted by at 11:06 pm on March 10, 2015
Category: Arms ExportCriminal PenaltiesDDTC

Da Dan Xia Weapons Cache by Colombia Prosecutor's Office [Fair Use]The owner of a Jerry’s Subs and Pizza franchise in Upper Marlboro, Maryland, pleaded guilty to shipping various rifles and rifle parts, including magazines, receivers, and sights, to Pakistan without the required license from the Directorate of Defense Trade Controls. According to the DOJ press release announcing the plea deal, Kamran Malik, the defendant, shipped the goods in packages with false return addresses and false descriptions of the contents. There is no indication as to  the intended recipients of the firearms and parts in Pakistan. As part of the plea deal, the Government has agreed to argue for a reduction in the offense level from 26 to 23, which would reduce the maximum penalty from 78 to 57 months.

Something else is going on here. There is also a sealed plea agreement supplement. That normally means that the defendant will be a cooperating witness and that the sealed supplement contains a cooperation agreement.  The purpose of sealing that information is to protect the cooperating defendant. Of course, since such supplements pretty much signal that the defendant is going to cooperate with the government, that purpose is largely lost. I suspect this means that the recipients of the items in Pakistan are of more than passing interest to the United States Government.

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Mar

4

Law Firm Sues DDTC over Application of Brokering Rules to Legal Advice


Posted by at 9:58 pm on March 4, 2015
Category: DDTCPart 129

State Department by Josh [CC-BY-SA-2.0 (https://creativecommons.org/licenses/by-nd/2.0/)], via Flickr https://www.flickr.com/photos/ncindc/2838284991 [cropped]On March 3, 2015, a small DC law firm filed a complaint against the Directorate of Defense Trade Controls (“DDTC”) seeking, inter alia, injunctive relief prohibiting DDTC from applying its brokering rules to the provision of specified types of legal advice. This blog previously has discussed the potential application of part 129 brokering rules to the activities of lawyers on behalf of their clients. As we stated, the broad language of part 129 always arguably covered legal work on behalf of clients, but no lawyers ever registered as brokers and DDTC never complained. When DDTC amended the brokering rules, it arguably then explicitly decided to start covering legal services. The interim rule does exempt legal advice, specifically noting, in the Federal Register notice at least, that legal advice about export compliance was within the exemption. The situation was then muddied when DDTC published FAQs on the brokering rules which said that common legal services, namely, “structuring a transaction” involving defense articles or negotiating contract terms involving defense articles was outside the scope of the exemption.

The plaintiff in the recently filed lawsuit optimistically (and some might say foolhardily) requested from DDTC an advisory opinion stating that certain legal services, such as advising on the structure of transactions involving defense articles and drafting contracts for the sale of defense articles, were outside the scope of Part 129. Not surprisingly, the request for an advisory opinion languished at DDTC for months, despite the plaintiff’s repeated communications with DDTC asking them to act on the advisory opinion request. Finally, according to the complaint, and eleven months after the request was made, a DDTC official called plaintiff and said the rules did not cover the activities specified in the request, and plaintiff, based on those representations, agreed to withdraw the request.

Seven months later, on February 24, 2015, in a plot twist worthy of Franz Kafka, the same DDTC official sent a letter to plaintiff and, incredibly, retracted the previously provided advice:

Please be advised that your letter of August 29, 2013 and our conversation which took place on July 3, 2014, lacked sufficient detail for the Department to make an official determination as to whether the activities discussed constituted brokering activities.

The official asked the plaintiff to submit another advisory opinion request. The understandably frustrated plaintiff filed a lawsuit instead.

There are, of course, a number of problems with applying Part 129 to legal services beyond the provision of legal advice on export compliance. To begin with, lawyers will need prior permission from the State Department under section 129.4 before becoming involved in transactions involving specified defense articles such as night vision equipment. Worse, section 122.5 would require lawyers to make all records relating to these transactions available to DDTC and law enforcement in violation of attorney-client privilege.

The good news, of course, is that DDTC’s bizarre volte-face on the applicability of Part 129 to legal services is unlikely to be favorably viewed by the court and means, I think, that the initial advantage in this lawsuit is with the plaintiff.

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Mar

3

Might As Well Be Hung for a Sheep as a Lamb


Posted by at 9:58 pm on March 3, 2015
Category: Criminal PenaltiesDDTCTechnical Data Export

Mozaffar Khazaee [Credit: Essex County Mug Shot Catalog]
ABOVE: Mozaffar Khazaee


On February 25, Mozaffar Khazaee, a former employee of various defense contractors, pleaded guilty to illegal export of ITAR-controlled technical data to Iran. The case started with an audacious shipment from Connecticut to a freight forwarder in Long Beach, California, by Khazaee of 44 boxes labelled as household goods that, in fact, contained numerous manuals and other technical documents relating to the F35 Joint Strike Fighter and military jet engines. The boxes were intended for ultimate shipment to Iran. Further investigation revealed that these documents had been taken by Khazaee from defense contractors for which he worked and that taking these documents violated the contractors’ rules requiring return of all documents at the end of employment. Khazaee was initially arrested for charges, set forth in the criminal complaint, of illegally transporting stolen property across state lines.

Khazaee’s ultimate plea was for violation of the Arms Export Control Act. The superseding information that served as the basis for the plea, however, alleged the export of only one document (out of the 44 boxes of documents) which was asserted to contain controlled technical data designated under Category XIX(g) of the United States Munitions List.

Two things stand out about this case. First, the superseding information charged, and Khazaee pleaded guilty to, export of the document and not attempted export of the document. The problem is the document was seized in Long Beach and never left the country. Section 120.17 of the ITAR defines export as “taking a defense article out of the United States.” No matter what your feelings may be about Long Beach, California, it is definitively still in the United States last time I checked. There is some evidence that the boxes may have been loaded onto the Panamanian-flagged NYK Libra. But given the definition of United States in section 120.13, it is hard to argue that the document left the United States until the NYK Libra did.

The second thing of interest were statements made by Khazaee, and cited in the superseding information, to potential employers in Iran that his job advancement in the United States had been hindered by his Iranian nationality even though he was an American citizen.

Even though working industry being very exciting, with best pay salary and high-tech events, my original nationality being Iranian (which I am very proud of), has caused me tremendous issue and hindrances towards my progress and goals. I can’t make any publication in current job (everything is very proprietary and restricted, mostly military projects), I was rejected to participate in the new advance engine program (this is beyond F135 engine, it’s called AETD), purely based on my original nationality. This is the primary … reason for my consideration to move to Iran.

Obviously one wrong does not justify another. However, discrimination against a U.S. citizen based on his national origin,if this is what occurred here, is a violation of federal law. And given the unhealthy obsession of the DoD and DDTC on national origin, at least with respect to dual and third-country nationals, it seems at least possible that this may have occurred. It may well be that the best way to encourage loyalty among American citizens is to treat them all equally without respect to where they were born.

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Feb

18

The Sledgehammer Exception


Posted by at 10:18 pm on February 18, 2015
Category: Arms ExportDDTCITARUSML

Sanaá, Yemen by Rod Waddington [CC-BY-SA-2.0 (http://creativecommons.org/licenses/by-sa/2.0)], via Flickr https://www.flickr.com/photos/rod_waddington/16293960729[cropped]

When the Marines evacuated the U.S. Embassy in Sanaá, Yemen, there were reports that they left some of their weapons behind, in large measure because they were leaving on a commercial flight. At first the military said that crew-served weapons and machine guns were destroyed before departure, but that M-9 pistols and M-4 carbines were handed over to Yemenis before the boarded the plane.

Realizing that this was perhaps a giant SNAFU, the military later revised its story to take care of the pistols and the carbines

“Upon arrival at the airfield, all personal weapons were rendered inoperable in accordance with advance planning,” the statement said. “Specifically, each bolt was removed from its weapons body and rendered inoperable by smashing with sledgehammers. The weapons’ bodies, minus the bolts, were then separately smashed with sledgehammers.”

There you have it: nothing to see here because the military used the smashed-to-bits exception which authorizes a U.S. person to retransfer a defense article to a foreign end user as long as someone takes a sledgehammer to it first. You may be wondering if there is such an exception, and the answer is maybe yes and maybe no.

A few initial observations are in order. First, the Arms Export Control Act applies to the military and active duty troops just as it does to everyone else. Second, the ITAR prohibits unlicensed transfer of defense articles from one foreign end use to another foreign end use without a license. So, unless there is a sledgehammer exception, we have a problem here.

The only possible source for the sledgehammer exception is section 126.4, which states:

The approval of the Directorate of Defense Trade Controls must be obtained before defense articles previously exported pursuant to this exemption are permanently transferred (e.g., property disposal of surplus defense articles overseas) unless the transfer is pursuant to a grant, sale, lease, loan or cooperative project under the Arms Export Control Act or a sale, lease or loan under the Foreign Assistance Act of 1961, as amended, or the defense articles have been rendered useless for military purposes beyond the possibility of restoration.

At first glance, this appears to support the sledgehammer exception. The military says it rendered the bolts “inoperable.” The rest of the weapons, however, were just smashed. So, I think we don’t have to worry about the bolts, but did smashing the rest of the weapons with a sledgehammer render every other part and component of those weapons “useless for military purposes beyond the possibility of restoration”?  Those parts and components are defense articles in Category I(h) and each and every one of them needed to be sledgehammered beyond the possibility of restoration. That’s a lot of sledgehammering, and it seems to me unlikely that actually happened before the Marines hopped onto their flights out of Yemen.

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Dec

16

The Shoot Blanks, Don’t They?


Posted by at 8:39 pm on December 16, 2014
Category: DDTC

Mockingjay Part 1 Publicity Still via http://mockingjay.net/wp-content/uploads/2014/11/15204888-25699313-thumbnail.jpg [Fair Use]In case you were wondering, rifles that shoot blanks are still rifles and are covered by Category I of the United States Munitions List.  So, film producers shooting at foreign locations may need to get from the State Department’s Directorate of Defense Trade Controls licenses to export these movie props to the foreign location.  Apparently, the producers of the Hunger Games, which exported Herstal P90s and F2000s to France and Germany, got tangled up in U.S. export laws and made things unnecessarily difficult for themselves.

According to the Hollywood Reporter:

Due to the U.S. legal restrictions, the guns couldn’t be sent off to Europe and then hop from country to country, causing complications for the multi-national shoot. “We can’t take the firearms and ship them out to France, and then go from France to Germany with them,” says Weschta. “We could do it, but they would have to come back here [to the U.S.] first and then go back out anyway.”

Ultimately, two discrete batches were sent — one to France, and one to Germany. … “The guns from ISS had to go back to the United States because of the temporary export license that was for France only,” [a prop handler for the film] says.

Of course, there is no reason why a temporary export license (DSP-73) can’t cover multiple destinations. The instructions for the DSP-73 application state:

Requests for temporary export of hardware may be submitted for more than one foreign destination. However, when the country(s) of ultimate destination are geographically dispersed, the applicant should submit a separate application for each major geographical region (e.g. Africa, East Asia, Europe, etc.).

Interestingly, the instructions for a DSP-73 application also include a requirement that applications for temporary exports of firearms for use in motion pictures provide “the details of the security arrangements in the foreign country.” Obviously DDTC is apparently used to handling request to export guns to shoot blanks on foreign movie sets.

If the Hunger Games team just obtained a DSP-73 for France, that was their own fault. Perhaps that is what comes from having unpaid interns fill out the license applications.

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