A memorandum opinion of the Ninth Circuit, filed on March 30, 2012, reaches a somewhat paradoxical conclusion. It held that a party that had been indicted for violations of the Arms Export Control Act had no right, even though the indictment was dismissed, for compensation resulting from the destruction of the seized merchandise by U.S. Customs. The merchandise in question consisted of weapons parts imported from Vietnam in violation of the U.S. arms embargo against Vietnam. The opinion pointed out that the goods were still contraband because the claimant did not have a license from ATF required for permanent imports or a license from the Department of State required for temporary imports.

Of course, the back story — why were the indictments dismissed for the illegal arms import? — is the most interesting part of this story and can be found in the district court opinion dismissing the arms charges. The charges in question were dismissed because the court found that the defendant (and claimant) had been denied his Sixth Amendment right to a speedy trial. That happened because — get this — U.S. Customs destroyed the central evidence in the case, the seized weapons parts, because it was costing too much to store them. Repeated calls by Customs to the AUSA prosecuting the case weren’t returned and so Customs simply torched the goods. The prosecution was somewhat loathe to reveal this blunder to the defense and so it kept dawdling on complying with the defendant’s discovery request. Interestingly, the district court held that the destruction of the evidence, although that constituted “gross negligence” by the government, did not violate the defendant’s rights under the Due Process Clause because the evidence was not exculpatory.

My favorite part of the district court decision is this little nugget explaining how the evidence wound up being destroyed:

SA Bench followed SA King’s suggestion and made several telephone calls to AUSA Schaeffer at the San Francisco United States Attorney’s Office, leaving voicemail messages, asking for return calls, and stating that unless he (Schaefer) authorized continued retention of the evidence, [Customs] would destroy it. At SA Bench’s request, his Group Supervisor Jerry Barnett also called one or two times and left the same voicemail messages for AUSA Schaefer. … AUSA Schaefer testified that he never received the voicemail messages, that he always returned his telephone calls and that he had no information that the weapons parts were in jeopardy of being destroyed. Numerous present and former government employees, however, testified that Schaefer had an extremely poor reputation for returning phone calls. SA Bench did not receive any return call from AUSA Schaefer and Bench advised Ms. Mower in July of 1999 that the evidence could be destroyed, which occurred on September 28, 1999. …

AUSA Schaefer had a reputation among law enforcement agents, defense attorneys and members of the United States Attorney’s Office in San Francisco, for extreme dereliction regarding returning telephone calls. SA Stoltz testified that when he wanted to contact Schaefer, it would typically require 50-60 calls and voicemail messages

[Record citations omitted.]

The amazing thing here is that someone would actually leave 50-60 messages in such a situation. I think that’s often referred to as the triumph of hope over experience.

In yesterday’s post, I discussed the ramifications of the debarment of six freight forwarders — Bax Global, Inc.; Ceva Logistics LLC; EGL, Inc.; Kuhne and Nagel International AG; Panalpina, Inc. (including its Swiss affiliate Panalpina Welttransport Holding AG); and Schenker AG — from government contracting. The State Department’s Directorate of Defense Trade Controls (“DDTC”) has today issued a guidance indicating that these parties are indeed ineligible to participate in any transaction involving the export of defense articles.

First, for the good news. Existing authorizations that include any of the six freight forwarders will be unaffected. Exporters can ship under licenses now in their hands even if the license refers to one of the six freight forwarders at issue.

Now for the bad news. Licenses received by DDTC after February 18, 2012, that name one of these freight forwarders and which do not contain a transaction exception request will be returned without action, unless a transaction exception request is filed with DDTC within three days of the issuance of the guidance. Those days apparently include this weekend, so unless you get a transaction exception request to DDTC by this Monday, February 27, your license application will be returned. (Have a nice weekend!)

It is not clear what will happen to pending applications received before February 18, 2012. The guidance says that they will be “reviewed by DDTC in the normal course,” whatever that means. Probably that means that the license will be granted with provisos or amendments excluding the six freight forwarders.

And although the guidance does not say this directly, you can be certain, indeed you can bet the farm, that no transaction exception requests are going to be granted. The guidance says that the transaction request should explain

why the generally ineligible entity should be part of the transaction (i.e., why the applicant is unable to utilize a different freight forwarder), and how the inclusion of the ineligible entity is in the interests of U.S. foreign policy or national security.

In other words, don’t waste your time because I do not see how you can ever demonstrate that no other freight forwarder is available.

It bears repeating that, as I said yesterday, the Arms Export Control Act does not require DDTC to do this. DDTC has the discretion not to do this. Where there is no reason to believe that the antitrust plea is evidence that these freight forwarders are now more likely to violate the ITAR in connection with their shipments, there is absolutely no reason to exclude these freight forwarders from all ITAR-related exports. Indeed, DDTC is removing from the pool of freight forwarders companies with substantial ITAR experience. This will force exporters to use smaller, less experienced companies who are more likely to violate the ITAR precisely because of their inexperience. DDTC foot, meet bullet. Bullet, meet DDTC foot.