ExportLawBlog

Archive for the ‘USML’ Category

Sep

17

Turkish Citizen Indicted For Foreign Downloads of Submarine Drawings

Posted by Clif Burns at 7:11 pm on September 17, 2014

By U.S. Navy via http://www.navy.mil/view_image.asp?id=16778 [Public Domain] Alper Calik — a Turkish citizen and co-owner of Clifton, New Jersey based Clifmax LLC — has been arrested based on a criminal complaint, dated September 12, charging him, among other things, with violating the Arms Export Control Act by exporting without a license certain drawings relating to the NSSN (Virginia) class submarine. (And, no, I am not reporting this case simply because the company is named Clifmax, although that is, leaving the alleged criminal conduct aside, an awesome name for a company.)

At the heart of the allegations are two drawings that Calik downloaded from a DoD database after signing the Military Critical Technical Data Agreement which must be signed in order to gain access to the DoD drawing database at issue. The criminal complaint alleges that Calik downloaded these images while in Turkey and attempts to assert that Calik knew doing this was illegal because he had signed the Military Critical Technical Data Agreement.

However, the Military Critical Technical Data Agreement is hardly specific about what is or is not permitted with respect to the drawings, saying only this:

[The undersigned] acknowledge[s] all responsibilities under applicable U.S. export control laws and regulations (including the obligation, under certain circumstances, to obtain an export license from the U.S. Government prior to the release of militarily critical technical data within the United States) or applicable Canadian export control laws and regulations, and (2) agree[s] not to disseminate militarily critical technical data in a manner that would violate applicable U.S. or Canadian export control laws and regulations.

Suffice it to say that this certification is poorly drafted and confusing, mentioning an export license only in the context of releasing the data “within the United States.” Nor does the certification that he would not “disseminate” the data clearly prohibit him from downloading the information for his own personal review in a foreign country. Obviously, such downloads do in fact violate U.S. exports if the downloads include ITAR-controlled technical data, but this certification neither makes that clear nor establishes that Calik had the necessary criminal intent when he downloaded the documents

The complaint alleges that there were legends restricting export on the drawings involved, but does not quote those legends. Whether these legends are enough of a predicate to support the criminal intent necessary for conviction on the export charges depends on what those legends said and that remains to be seen.

UPDATE: Â Two commenters make an excellent point about using the legends on the drawings as indicia of criminal intent: Calik would have only seen the legendsÂ after he downloaded the drawings in Turkey. Â The significance of this point is magnified even further when you consider this statement from the criminal complaint:

Beginning in or around 2009 to the present time, ALPER CALIK downloaded approximately one hundred thousand drawings. some of which were subject to U.S. export control regulations without obtaining export licenses from the U.S. Department of State. ALPER CALIK was not in the United States when the majority of the drawings were downloaded.

At issue are only two of these one hundred thousand downloaded drawings, which would have revealed the legends only after being downloaded. Â The overwhelming portion of the remainder of the drawings not having any indication that the downloading of these or other drawings might be problematic.

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Jun

24

It’s Good To Be The King

Posted by Clif Burns at 11:15 pm on June 24, 2014

Category: DDTC • ITAR • USML

Intersil Low Dose Irradiator via http://www.intersil.com/en/applications/rad-hard/eldrs.html [Fair Use] Last week the Directorate of Defense Trade Controls (“DDTC”) announced that it had fined Intersil Corporation, a California-based manufacturer and developer of semiconductors and integrated circuits, $10,000,000 of which $6,000,000 goes to Uncle Sam and the remaining $4,000,000 goes to Intersil’s compliance program and remedial measures. Along with the fines, DDTC has required Intersil to jump through a number of now-typical compliance and re-education hoops, including appointing an ombudsman, hiring a special compliance officer, rewriting its compliance programs, engaging in audits, making frequent reports to DDTC and writing “I will not violate the ITAR” three million times on a blackboard after school. Well, of course, only the last item was not actually required.

According to the Proposed Charging Letter, Intersil incurred the ire of DDTC by classifying certain of its products as ECCN 3A001.a.1, 3A001.a.2, and EAR99 even though the items were radiation hardened and space qualified and, therefore, covered instead by USML Category XV(e). Why Intersil made this mistake is not revealed in the documents but since Intersil was applying for BIS licenses for the goods when required, it is hard to imagine that it was anything other than a good faith mistake (which is, probably, the reason why this information is omitted.) As a result, there were 3,152 unauthorized exports of Intersil’s products, although, due to the statute of limitations, only 339 exports were actually charged, with DDTC swearing left and right that although it couldn’t help mentioning the 3,152 exports it was paying absolutely no attention whatsoever to those in formulating the $10 million penalty.

But here is the most interesting part of the charging documents:

Several of the unauthorized exports were subsequently re-exported or retransferred without authorization due in part to the misclassification of the ICs.On August 20, 2010, a DDTC official misinformed Intersil that for any ICs that “HAVE already been exported under EAR jurisdiction, these [ICs] ARE NOT retroactively subject to the retransfer provisions of 22 CFR 123.9.: Intersil was further misadvised that Intersil did not need to inform its foreign customers to submit ITAR re-export authorization for these items and that this “decision to not retroactively aply USML controls for these already exported [ICs] will continue to be applicable even if a future formal CJ determination asserts USML controls apply.”

Interestingly, notwithstanding this bad advice, Intersil is charged with causing various unauthorized re-exports from, and retransfers in, foreign countries due to its misclassification of the integrated circuits. Whether or not any of these were the result, at least in part, of DDTC’s admittedly bad advice that the retransfer provisions would not apply to items exported under the EAR is not clear, but let’s give DDTC the benefit of the doubt and assume that these were all unrelated.

Even so, there is still an interesting moral to this story. Exporters who make mistakes have to pay large fines and engage in burdensome remediation activities. DDTC officials who make mistakes have to do, er, well, nothing at all because, well, you know, mistakes happen. As they say, it’s good to be the king.

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Feb

4

Praise the Lord and Pass on Exporting the Ammunition

Posted by Clif Burns at 8:15 pm on February 4, 2014

Category: Criminal Penalties • DDTC • USML

U.S. Court of Appeals for the Fourth Circuit via http://www.gsa.gov/graphics/staffoffices/PowellCourthouse.jpg [Public Domain]

ABOVE: Fourth Circuit Court of Appeals

The Fourth Circuit recently handed down a decision in United States v. Bishop in which it upheld the conviction of Brian Bishop, a U.S. foreign service officer, who was convicted of an attempted export of ammunition in connection with his move from his residence in Alabama to his post in Jordan. Bishop’s appeal centered on the knowledge requirement for an export conviction, arguing that he was unaware that the items he was exporting were on the USML. The Fourth Circuit held that specific knowledge that the items were USML is not necessary to support a conviction and ruled that the District Court had adequate evidence that Bishop knew that the exports were illegal.

The odd part of this finding is that Bishop had left the ammunition in the boxes in which the ammunition was purchased and which were clearly labelled â€œORMâ€“Dâ€ and â€œcartridges, small arms.â€ Indeed, the District Court relied on that labeling to acquit Bishop on charges of delivering ammunition to a carrier without notice in violation of 18 U.S.C. Â§ 922(e). Generally speaking, criminal export cases almost always rely on mislabeling the goods as the most significantÂ indicia of criminal intent, so this case is a bit of an outlier.

The evidence of Bishop’s intent relied on by the District Court, and upheld by the Fourth Circuit, seems pretty sketchy. The Fourth Circuit cited State Department training that Bishop received on the Foreign Affairs Manual, which states that shipment of ammunition is prohibited. The FAM cites 27 C.F.R. Â§ 478 as authority for that prohibition and that regulation cites the Arms Export Control Act, although there is no suggestion that Bishop looked up the text of that regulation, not cited in the FAM, and saw its reference to the AECA. And, worse yet, the State Department employee who provided the FAM training to Bishop herself testified: “I can’t tell you what the State Department’s reasoning isâ€ for prohibiting the shipment of ammunition.

The Fourth Circuit further cites an email from the moving company that Bishop’s wife received after the moving company had taken possession of the household effects stating that the shipment of the ammunition was illegal. This hardly seems probative of Bishop’s state of mind when he gave the ammunition to the moving company for export. Also cited by the Court was an inventory, prepared by the movers, which Bishop signed, and which did not mention the ammunition. Â However, there was no evidence that he read the inventory carefully or noticed the omission. The worst evidence for Bishop is, perhaps, the fact that some of the ammunition was repacked by Bishop in boxes labelled “weights,” although it seems hard to rely on that when some of the ammunition remained in its original packaging and was clearly marked as ammunition. Â Indeed, all of the evidence cited by the two courts cannot trump the simple fact that Bishop shipped the ammunition in clearly marked boxes.

Ironically, in a case that turns on knowledge of illegality, the court and the prosecutors themselves seem to be confused about what ammunition is and isn’t on the USML. Excluded from the AECA charges were “nearly 2,000 rounds of .45â€“caliber and 12â€“gauge shotgun ammunition.” These were only included in the count alleging delivery of ammunition without notice to a carrier. The 12-gauge shotgun shells are probably not Category III of the USML because shotguns with barrel lengths of 18 inches or longer are excluded from Category I. That ammunition would therefore be controlled under ECCN 0A984 and could be exported to Jordan without license. But .45 caliber ammunition is clearly covered under USML Category III, so it is odd that it was excluded from the count alleging the AECA violations.

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Dec

20

Back in the U.S.S.R.? Pleading Guilty to U.S. Export Violations May Get You Home

Posted by George Murphy at 12:53 am on December 20, 2013

Category: Criminal Penalties • DDTC • General • ITAR • USML

By Sgt. Scott M. Biscuiti [Public domain], via Wikimedia Commons http://commons.wikimedia.org/wiki/File%3ADefense.gov_photo_essay_090329-M-7747B-015.jpg

On Tuesday, Russian Roman Kvinikadze pleaded guilty inÂ federal court in Wyoming to charges that he attempted to export thermal imaging weapon sights to Russia without a required license from the U.S. State Department.Â Last month, we reported on Kvinikadzeâ€™s arrest and the charges brought against him as well as the Russian governmentâ€™s criticism of the entire matter.Â Kvinikadzeâ€™s plea is not a surprising development since, as we alluded to last month, an entrapment defense even under the most favorable circumstances is difficult to prove.

What is surprising, however, is how soon Kvinikadze may be leaving U.S. federal prison.Â The Associated Press reported on Tuesday that the federal judge in Kvinikadzeâ€™s case said “immigration authorities intend to send Kivinikadze back to Russia.”Â As we said last month, Kvinikadzeâ€™s best defense was not going to be in the courtroom but through diplomatic channels plied with the Russian governmentâ€™s support.Â Unlike a month ago, when the Russian human rights commissioner publicly decried Kvinikadzeâ€™s arrest, the Russian government has been quiet since Kvinikadze entered his guilty plea.

If Kvinikadze in fact returns shortly to Russia, the Department of Homeland Security, the agency which conducted the investigation into Kvinikadze, may beÂ reconsidering the effectiveness of operations, like the one used against Kvinikadze, that engage foreign persons online to arrange for unlawful export transactionsÂ and entice them into travel to the United States to be arrested.Â At a minimum, would-be U.S. export control violators abroad ought to think twice about meeting a potential business partner for the first time in the United States.Â But more importantly, foreign governments may begin to join Russia in denouncing such U.S. policing of its laws around the world.Â One of the aspects that have made U.S. investigations and law enforcement activitiesÂ abroad of FCPA violations so successful in recent years is the U.S. cooperation with foreign law enforcement. Without such cooperation, the United States mayÂ see more guilty foreign criminals going home.

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Nov

11

From Russia with â€¦ Weapon Sights and a Diplomatic Row?

Posted by George Murphy at 5:54 pm on November 11, 2013

Category: Arms Export • Criminal Penalties • DDTC • USML

By Sgt. Scott M. Biscuiti [Public domain], via Wikimedia Commons http://commons.wikimedia.org/wiki/File%3ADefense.gov_photo_essay_090329-M-7747B-015.jpg

Last week, a federal judge in Wyoming set trial for February of next year for Russian Roman Kvinikadze, who was arrested this August on charges that he attempted to export thermal imaging weapon sights without a required license from the U.S. State Department.

The story of Kvinikadzeâ€™s arrest began last year when he contacted an undercover Department of Homeland Security agent on the Chinese e-commerce site, Alibaba.com.Â It is unclear from court documents what the DHS agent posted on Alibaba.com to attract Kvinikadze, but it was enough for Kvinikadze to introduce himself as an aspiring hunting store owner that wanted a quote for weapon sights.Â According to the criminal complaint, Kvinikadze eventually traveled to a Las Vegas gun show where the DHS agent told him that the sights required a U.S. export license but “there were other ways to ship the weapon sights without a license.”Â Kvinikadze apparently expressed continued interest and laterÂ went to meetÂ the agentÂ in Wyoming, where he was arrested.

According to Russian media on Friday, the Russian Foreign Ministryâ€™s human rights commissioner described Kvinikadzeâ€™s arrest as a “kind of American law enforcement agency approach to Russian citizens [that] is becoming increasingly disrespectful of international law and bilateral agreements, including the 1999 agreement on mutual legal assistance in investigating crimes.”Â He also reportedly described Kvinikadze as “being knowingly provoked to violate the law as he was lured into the United States [to be arrested].”

The Russian governmentÂ appears to beÂ intimating Kvinikadzeâ€™s entrapment defense at trial.Â Although a successful entrapment defense is difficult and complex, Kvinikadze appears to have a better chance than previous foreign nationals engaging with undercover U.S. agents online.Â In September, weÂ discussedÂ the arrest of Patrick Campbell, the foreign national arrested at JFK airport for, among other things, having yellowcake uranium in his luggage.Â In that case, again beginning on Alibaba.com, Campbell responded to a DHS agentâ€™s solicitation for yellowcake and informed the agent that he could “handle” any U.S. export restrictions that concerned the agent in shipping uranium to Iran.

In Kvinikadzeâ€™s case, critical facts are the reverse: Kvinikadze found the DHS agent purporting to be a seller and the DHS agent was the one who informed Kvinikadze ofÂ a required U.S. export license and “ways” to avoid getting one.Â The criminal complaint is, however, peppered with suggestions that Kvinikadze was a sophisticated buyer and was not lured, but rather conspired, to export the sights illegally.

What may be Kvinikadzeâ€™s best defense is the Russian governmentâ€™s support.Â The Russian human rights commissioner has reportedly also said that “[Kvinikadzeâ€™s] situation is being closely followed by the Russian Foreign Ministry,” and that after Kvinikadzeâ€™s arrest, “our consular workers got in touch with him and with the prison authorities in Nebraska where he is being held â€¦ We will continue providing consular-legal assistance to our compatriot.”

There are, of course, a host of reasons why U.S. law enforcementÂ looks forÂ foreign threats on foreign websites where activity threatening U.S. security interests is taking place.Â However, how such operations are conducted as well as their frequency and targets have, as this case shows, diplomatic ramifications.

Based on the Russian governmentâ€™s response, one has to wonder how the United States would respond if the weapon sights were looking the other way.Â How Russiaâ€™s response to Kvinikadze affects U.S. law enforcement strategy remains to be seen.Â In the meantime, if sites like Alibaba.com are open for undercover U.S. law enforcement, any U.S. business should be keenly aware that other countries are likely doing the same.

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