ABOVE: Tomoaki Iishiba

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Captain Tomoaki Iishiba, stationed at Fort Lewis in Washington State, has been charged in connection with his shipment of sixty EoTech 553 night-vision-compatible holographic rifle sights to Japan without obtaining the required export license. Prior to these charges, Captain Iishiba was best known as one of the technical consultants on a computer war game known as Metal Gear Solid.

The export classification of these sights is unclear. The one-count criminal information filed by the U.S. Attorney makes no attempt to provide an export classification for the items. If these sights are principally used on firearms listed on Category I of the USML then they would be classified as Category I(h) and require a license from the Department of State’s Directorate of Defense Trade Controls. The sights could also be covered by ECCN 0A987 which covers “optical sighting devices for firearms,” but this classification does not require a license in the case of shipments to Japan. So, we can probably safely assume that the government believes that the items are properly classified as USML Category I(h).

Notwithstanding the likely USML classification of the sights, the criminal information does not charge Iishiba under 22 U.S.C. § 2778(c), the criminal provision of the Arms Export Control Act. Rather the charge is conspiracy to violate 18 U.S.C. § 555, the overseas anti-smuggling provision added by the USA Patriot Improvement and Reauthorization Act of 2005.* That section provides as follows:

Whoever fraudulently or knowingly exports or sends from the United States, or attempts to export or send from the United States, any merchandise, article, or object contrary to any law or regulation of the United States, or receives, conceals, buys, sells, or in any manner facilitates the transportation, concealment, or sale of such merchandise, article or object, prior to exportation, knowing the same to be intended for exportation contrary to any law or regulation of the United States, shall be fined under this title, imprisoned not more than 10 years, or both.

Significantly, the criminal information doesn’t allege that Iishiba knew that it was illegal to export the sights. Rather it only alleges that he “knowingly exported” the rifle sights. Now the reason to charge under 18 U.S.C. § 555 rather than Arms Export Control Act, 22 U.S.C. § 2778(h), seems clear: the prosecution is trying to avoid the scienter requirement of the later statute.

Section 127.1 of the International Traffic in Arms Regulations is violated by an unlicensed export of a defense article whether or not the violator was aware that the export required a license. And it would appear that the prosecution is reading the anti-smuggling provision to require only a knowing export that violates a regulation without a scienter requirement. Whether a court will support this reading of the new provision remains to be seen.

*The provision was enacted as 18 U.S.C. § 554, even though there was already a § 554, and it was later recodified as § 555. The information, however, continues to cite the provision as 18 U.S.C. § 554.

New-Jersey-based Advanced Orientation Systems entered into a settlement agreement with the Bureau of Industry and Security (”BIS”) pursuant to which it agreed to pay a $31,500 to settle charges that it shipped 11 “tiltometers” to Mayrow General Trading Company in August 2006. BIS agreed to waive $16,500 of this penalty if AOS committed no further export violations for one year. Exports to Mayrow General Trading Company without a BIS license are prohibited under BIS’s General Order No. 3.

AOS appears to be a relatively small company and not an experienced exporter, so it’s not surprising that it was unaware of the prohibitions of General Order No. 3, and there is no allegation in the charging documents that AOS was engaged in an intentional violation of BIS rules. Indeed, General Order No. 3 was promulgated by BIS in June 2006, only two months prior to the exports in question. This probably accounts for the relatively small fine agreed to by BIS.

One humorous aspect of the charging papers is that BIS continually insists on referring to the exported equipment as “tiltometers,” even though there is no such thing as a “tiltometer.” Maybe they were thinking about Tilt ‘O Wheels or something.

The correct term is an “inclination sensor,” which is the term used by AOS on its own website. A quick Google search of “tiltometer” would have revealed that this term refers only to a digital camera project by some English computer geeks who hung some plumb weights and protractors from a camera and to an Internet test, part of the Texas Information Literacy Tutorial about the best way to research certain questions. I guess the folks at BIS still don’t have access to the Internet.

It’s a slow day today in export news, so we’re bringing you a grab bag of various items, each interesting but none worthy of an entire post:

• Vanderbilt University has announced that it has hired a new assistant director of export compliance to handle the “new wave of federal export control regulations that is crashing down on Vanderbilt.” Were we asleep and missed a new wave of export control regulations or did Vanderbilt just wake up and discover the export regulations that crashed down on Vanderbilt years ago?
• An article on the Deutsche Welle website indicates that German firms are circumventing sanctions on Iran by doing business in Iran with suitcases of cash to avoid detection. This leads to the day’s most amusing quote from a German businessman living in Tehran:
  

  “If a plane crashes on its way to Tehran from Germany, then the loss of the luggage would be more expensive than the loss of the plane,” he said.

• A spokesman for the State Department testified yesterday in a Senate hearing that in response to the sham electoral victory of Robert Mugabe in Zimbabwe, the United States is considering additional sanctions against individuals and government entities in Zimbabwe. Raise your hands if you think these will lead Mugabe to break down in tears, resign his office, and flee the country.

ABOVE: Coke and Fanta in Iran

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A fascinating Associated Press article published today reports the results of an FOIA request the wire service made for information relating to U.S. exports to Iran. According to the information obtained by the AP, U.S. exports have grown more than ten-fold during the last seven years of the Bush administration, notwithstanding U.S. concerns about nuclear proliferation activities by Iran. The largest export: cigarettes. Almost $158 million dollars worth of cigarettes. That’s a lot of lung cancer and heart disease. (Full disclosure: as a former smoker, I tend to be a rabidly anti-smoking.)

Most surprisingly, the figures given to the AP reveal military exports to Iran, including $106,635 in military rifles and $8,760 in rifle parts and other accessories. Adam Szubin, speaking for the Office of Foreign Assets Control, argued that it was unlikely that these exports actually occurred and cited the possibility that shipping documents listed these codes erroneously or that shippers may have confused Iran and Iraq when filling out these documents. Some support for this can be found in government data saying that the U.S. exported $13,000 in “aircraft launching gear and/or deck arrestors” to Iran. As far as anyone knows Iran doesn’t have any aircraft carriers Still, even if these were mistakes by the shippers, one has to wonder why someone at Customs didn’t catch these mistakes.

Agents of the U.S. Immigration and Customs Enforcement (”ICE”) raided the Washington state facilities of Aerospace Manufacturing Technologies, Inc., and walked away with thirty-two workers that ICE alleges were illegal immigrants working at the facility. Those workers are now in ICE custody in Tacoma, Washington, and are being processed for deportation.

According to the article reporting the raid, the ICE action was part of its “Worksite Enforcement” initiative. This initiative, which has its own enforcement unit, targets critical infrastructure and sensitive sites. AMT manufactures parts for civilian and military aircraft and is registered with the Directorate of Defense Trade Controls.

Assuming that the workers are ultimately determined to be illegal and undocumented aliens, AMT might be expecting, sooner rather than later, a visit from the enforcement staff of DDTC. After all, if there were thirty-two foreigners working in a facility that manufactures military aircraft parts, there will certainly be a reasonable suspicion that AMT may have transferred technical data on these military parts if, by no other reason, allowing them to see certain of the military parts. Exports under section 120.17 of the International Traffic in Arms Regulations includes “visual disclosure.”

A major topic of discussion in the deemed export area has been the possible ramifications of having legal and or illegal foreign workers on cleaning crews and in IT departments. There hasn’t been real discussion of illegal foreign workers actually involved on production crews because, I suppose, it was thought that this wasn’t a very likely possibility. Until now.

The folks at iRobot not only make the Roomba, which will robotically vacuum your floors and drive your dog insane, but also they make military iRobots, which will chase down and, er, vacuum up terrorists, enemy combatants, and other assorted malefactors. I, for one, would not like to see the bad boy pictured on the right chasing me down some hallway or alley. Not every iRobot, however, packs heat, and many perform certain defensive military missions such as handling and disabling IEDs, detecting chemical and biological warfare agents, and other cool stuff.

According to this recent post at Planetary Gear, the iRobot is attracting as much foreign interest as the iPhone and the iPod. And that, of course, raises a few export issues. Depending on how the robot is decked out, it can either be a killer robot of doom or WALL-E, the trashbot. The iRobot can be just as useful to first responders as to military troops.

A review of the iRobot product literature indicates that the company has played it safe and simply takes the position that the tactical iRobot is USML whether or not it’s been given the naughty or nice accoutrements. But technology is quickly outpacing the creaky old United States Munitions List, and it’s not very clear what is the correct USML category for the robot. Of course, there’s always Category XI: “electronic equipment . . . which is specifically designed, modified or configured for military application.” Or “catch-all” Category XXI for an article not enumerated in the other categories “which has substantial military applicability” and “which has been specifically designed, developed, configured, adapted or modified for military purposes.” But that seems rather unsatisfying, doesn’t it? Shouldn’t something this deadly have its own category?

And suppose that iRobot took a hard line position that a robot not outfitted with military gear but capable of being so outfitted wasn’t USML, what would be the ECCN of the robot?

(For those confused about the title, go here.)

Earlier this week, Rep. Anthony Weiner (D-NY) introduced H.R. 6361, or the “Stop Business with Terrorists Act of 2008,” which was introduced into the Senate earlier this year as S.1234 by Senators Lautenberg (D-NJ) and Clinton (D-NY). The purpose of the bill is to reverse current law which permits, in limited circumstances, dealings by foreign subsidiaries of U.S. firms with Iran.

Under current law, a foreign subsidiary could do business with Iran in the following circumstances. First, it must be a foreign subsidiary incorporated in a foreign jurisdiction, not a branch operation of a U.S. company. Second, the transactions with Iran cannot involve any U.S. persons. Third, some have argued that in order not to be seen as a device to evade the sanctions, the foreign subsidiary must have some business other than dealing with Iran.

Under the Stop Business with Terrorists Act of 2008, a parent company will be liable for acts of its foreign subsidiaries with respect to Iran that violate Executive Order 12959 and Executive Order 13059 notwithstanding its incorporation in a foreign jurisdiction and the absence of U.S. involvement in the transaction at issue. Those Executive Orders prohibit, among other things, exports and reexports of U.S. origin goods, services and technology to Iran.

Although this legislation doesn’t fall directly within the purview of the European Union’s blocking legislation, Council Regulation (EC) No 2271/96, one has to wonder whether yet another effort by the U.S. to extend the scope of its sanctions regulations outside its own borders will provoke any countermeasures or retaliation by Europe. Of course, the extraterritorial scope here is more limited than it was in the Iran and Libya Sanctions Act because only the U.S. parent is penalized under the proposed legislation. Still, the legislation will have a direct impact on the operations of E.U. companies insofar as their U.S. parents prohibit them from dealings with Iran.

Back in 1997, the folks at Omega Engineering were very bad. They applied to the Bureau of Industry and Security (”BIS”) for a license to ship laboratory equipment to Pakistan. The license was denied. The appeal of the license denial was denied. They shipped the goods anyway with an intermediate stop in Newport, Germany. BIS was not amused. Omega agreed to a $187,000 fine and an order, entered in November 2003, forbidding it from being involved in any exports to Pakistan for five years.

Fast forward to 2008. Omega is no longer an export scofflaw. Indeed, Omega helps BIS obtain a criminal indictment against an individual who was trying to export U.S.-origin goods to Iran without a license. The reward? BIS agreed last week, in consideration of the “extraordinary cooperation” of Omega, which helped BIS obtain “crucial” evidence, to suspend the reminder of the export denial order which otherwise would have remained in effect until November 2008.

And who says you never get a second chance?

A Florida man and a California man who ran separate aviation parts businesses have been arrested and charged, in a criminal complaint unsealed yesterday, with violations of the Arms Export Control Act and the U.S. embargo on Iran in connection with alleged exports to Iran of spare parts for F-14s and other military aircraft. According to the criminal complaint (not yet available on Pacer but as described by the Miami Herald), orders for the parts were received by email and then shipped to Dubai — that’s a huge surprise!! — for re-export to Iran.

One of the defendants is represented by Robert Abreu, a Miami criminal defense attorney who appears to have made the mistake of speaking to the New York Times before actually reading the Arms Export Control Act and the International Traffic in Arms Regulations that govern the case:

Robert Abreu, a lawyer for [one of the defendants], said in an interview that based on his initial reading of the case: “It does not deal apparently with any weapons or munitions. As far as I know, it was simply dual-use aircraft parts, and I think this is being trumped up to an arms violation where it’s not.”

Perhaps Mr. Abreu was misquoted, but this seems to suggest that he thinks that aircraft parts can’t be the predicate of an Arms Export Control Act prosecution because they aren’t “weapons or munitions.” Aircraft parts “specifically designed or modified for” military aircraft fall under Category VIII(h) of the United States Munitions List, and their exports are controlled by the Arms Export Control Act. One of the parts mentioned in the criminal complaint was an F-14 harness, and this is clearly a part specifically designed for the F-14 and not usable in any other craft.

ABOVE: John L. Withers, II

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On Friday, a federal grand jury indicted arms dealer AEY and four company officials on charges, among others, that they committed procurement fraud and lied to U.S. officials about the origin of Chinese manufactured ammunition supplied by the company to Afghan forces in Afghanistan pursuant to a U.S. Government contract. Section 126.1 of the International Traffic in Arms Regulations provides that it is the policy of the United States to deny approvals for exports and imports of defense articles originating in China.

Today, Henry Waxman, the Chairman of the House Committee on Oversight and Government Reform, released a letter detailing evidence the Chairman said suggested that John L. Withers, II, the U.S. ambassador to Albania, was involved in efforts to conceal the origin of the Chinese ammunition. The Chinese-made ammunition was being sold to AEY by the Albanian Ministry of Defense through the Military Export Import Company of Albania (MEICO). Because the Ministry, AEY and MEICO knew that Chinese ammunition couldn’t be sold by AEY, the Chinese ammunition was being repackaged at a facility in Albania prior to its export. When a New York Times reporter wanted to inspect the facility, the Albanians became alarmed.

According to testimony before the Oversight and Government Reform Committee by Major Larry Harrison, a Defense Department official working in Albania, the Albanian Defense Minister requested an urgent meeting with the U.S. Ambassador in November 2007:

Major Harrison stated that in response to the Albanian Defense Minister’s request, he contacted the U.S. Embassy’s Deputy Chief of Mission, Stephen Cristina, who arranged for a meeting to take place at his private residence in Tirana that evening. Major Harrison personally attended the meeting, along with the Albanian Defense Minister, Ambassador Withers, Deputy Chief of Mission Cristina, and the Embassy’s Regional Security Officer, Patrick Leonard.

According to Major Harrison, the meeting lasted for several hours, ending around midnight. Major Harrison told the Committee that during this meeting, the Albanian Defense Minister asked for help from the U.S. Ambassador?l According to Major Harrison, “He made several comments to the effect of how he had been a friend of the U.S., he’d help the U.S…. He felt the U.S. owed him something.”

Major Harrison stated that the officials then discussed how to handle the New York Times reporter. He stated that his advice was to not allow the reporter to visit the facility, but that his advice was not accepted. Instead, the Albanian Defense Minister called the commanding general of the Albanian military forces and instructed him to remove all Chinese ammunition boxes from the site of the repackaging operation so that “there would be nothing for the reporter to see.” According to Major Harrison, “the Ambassador agreed that this would alleviate the suspicion of wrongdoing, if Mr. Wood [the New York Times reporter], while he was at Rinas, did not see Chinese ammo boxes.”

Waxman also alleges that U.S. embassy officials also attempted to conceal information about the November 2007 meeting from the Committee. This allegation is based on a document which the Embassy supplied to the Committee on its meetings with Albanian officials with respect to AEY contract and which did not fully describe the meeting at issue.

Neither the State Department, nor Ambassador Withers, has issued a response to these charges, but we won’t be surprised if the State Department makes allusions to a certain novel by Joseph Conrad and a character named Kurtz.