Archive for November, 2011


Nov

30

Debugger Invokes Export Law As A Defense To Larceny Charge


Posted by Clif Burns at 5:33 pm on November 30, 2011
Category: General

Rockport HarborThis story in the Gloucester Daily Times involving prosecution of a Rockport, Massachusetts man for, among other things, possession of a rocket launcher (only for protection against burglars, of course) has an interesting export law angle. The defendant, James Atkinson, is an emergency medical technician working for an ambulance company and owns a company called Granite Island Group, which apparently is involved in providing counter-surveillance consulting services and equipment.

Rockport authorities, according to the newspaper article, first became aware of Atkinson when a Swiss company complained that Atkinson failed to deliver $32,000 of counter-surveillance equipment that it had ordered from Granite Island. This led to a larceny arrest, a home search, and, voilà, the discovery of the rocket launcher and other firearms.

Mr. Atkinson’s defense to the larceny charge was interesting. According to the newspaper article, he hadn’t shipped the equipment “because the firm didn’t supply him with proper export documents.” This is an odd defense, it it can be called a defense, because it’s not clear that surveillance countermeasures such as those being sold by Mr. Atkinson required an export license. ECCN 5A980 covers surreptitious listening devices but does not cover devices used to detect or disable such surreptitious devices.

Of course, even if export licenses were required and somehow could not be obtained, there’s still the issue as to why the purchase price wasn’t simply refunded. But that, of course, involves matters unrelated to my expertise and the subject of this blog, so I’ll let each reader speculate independently on this issue.

Naturally Mr. Atkinson was not going to sit around and let the city take his rocket launcher just because he was accused of welching on an export:

Atkinson filed a 653-page lawsuit against the town, Rockport Police, the Commonwealth of Massachusetts, and scores of institutions and individuals.

His lawsuit asks for, among other things, $175 million from the town. He has said the town violated his civil rights by entering his home and confiscating his firearms.

You might be surprised by the sheer length of the lawsuit, apparently only a few pages short of War and Peace, but that’s only if you are unaware of the binding legal precedent that requires that judgments always be granted in favor of the side that files the most paper in a proceeding.

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Nov

22

New U.S. Sanctions on Foreign Companies Doing Business in Iran


Posted by Clif Burns at 11:23 pm on November 22, 2011
Category: Iran SanctionsOFAC

Iranian oil fieldThe White House signed, on November 19, Executive Order 13590, which increased the sanctions on foreign firms doing business in Iran. An official copy of the executive order has not been released but it is described in this “Fact Sheet” released by the Treasury Department. A State Department briefing held yesterday provides further background on the new sanctions.

The new sanctions expand on the sanctions on foreign persons dealing with the Iranian energy sector that started with the Iran Sanctions Act of 1996 and continued with last year’s Comprehensive Iran Sanctions, Accountability and Divestment Act of 2010 (“CISADA”).

Under CISADA, foreign persons can be sanctioned if they make investments that contribute to the development of petroleum resources in Iran. Investment is defined to exclude the simple sale of goods to Iranian petroleum companies. Under the new sanctions, the transactional amounts are reduced to $1,000,000 per transaction or $5,000,000 in a twelve-month period. Additionally, the new sanctions will cover the simple sale of goods in excess of these amounts.

The new sanctions now go beyond the petroleum industry in Iran and will include the petrochemical industry. Foreign companies will face sanctions if they provide goods, services, or technology to Iran that could “directly and significantly facilitate the maintenance or expansion of its domestic production of petrochemical products.” The triggers for these petrochemical sales are even lower than the triggers for petroleum investments and cover a single transaction that has a fair market value of $250,000 or more or a series of transactions valued at $1 million or more over a 12-month period.

This blog has pointed out before that secondary boycotts of this sort violate U.S. obligations under GATT. The European Union filed a complaint with the WTO against the secondary boycotts contained in the Iran Sanctions Act, a complaint that was withdrawn when the Clinton administration agreed to use the national security exception in the Act to permit certain European investments in Iran. However, given all the accumulating evidence that Iran is in fact attempting to develop a nuclear bomb, it seems unlikely that the E.U. will seek a WTO remedy with respect to these new sanctions.

(For an excellent summary of Iran sanctions legislation, take a look at this excellent CRS study from October.)

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Nov

17

Ingrate


Posted by Clif Burns at 6:50 pm on November 17, 2011
Category: BISEntity List

Love FestThis blog reported back in January on the removal of various Indian companies and organizations from the Entity List. This removal eliminated the requirement for licenses for certain exports to the removed companies that might not have otherwise required licenses.

An Indian website today quoted an executive of one of these removed groups who was, it seems, unenthused about the impact of the removal:

“I do not think removal of some DRDO labs from the Entity List by the U.S. has changed anything for us. The American export regulations for dual-use technologies and items need stringent clearances from their commerce and defence departments,” Saraswat [Chief of the Defence Research and Development Organisation ("DRDO")] said when asked if the American policy announced during US President Barack Obama’s visit last November and implemented in January this year had helped India in anyway.

“Whether or now we are with Missile Technology Control Regime (MTCR), the export rules and regulations apply for us. We have to go through the process. It is not an easy process and it becomes difficult to acquire them,” he said.

“Our experience has been these regulations make it more difficult,” he added.

If that’s the case, perhaps Saraswat won’t mind if the U.S. puts DRDO back on the Entity List.

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Nov

16

So That’s The Reason for the China Arms Embargo?


Posted by Clif Burns at 7:03 pm on November 16, 2011
Category: Arms ExportCriminal Penalties

Swiss Technology HQNJ-based Swiss Technology, Inc. was sentenced yesterday to probation in connection with its guilty plea last July to charges that it violated the Arms Export Control Act when it exported diagrams of military rifle parts to China for manufacture there. The company was also ordered to pay $1.1 million in restitution to the Department of Defense.

The DOJ press release in July regarding the initial plea is larded with the typically hyperbolic language of prosecutors in export cases, but with a twist.

“We simply can’t risk that companies trying to manufacture military equipment on the cheap will expose our troops to more danger than they already face,” said U.S. Attorney Fishman.

“Our armed forces deserve the very best equipment to perform their missions in these difficult times,” said Edward T. Bradley, Special Agent in Charge, Department of Defense, Defense Criminal Investigative Service (DCIS), Northeast Field Office. “Fraudulent practices, designed to illegally enrich a corporation, and which could compromise the integrity and reliability of that vital equipment is inexcusable. The Defense Criminal Investigative Service is committed to vigorously investigating such violations of law.”

“This case underscores ICE’s commitment to work tirelessly with our law enforcement partners to investigate individuals or corporate organizations that circumvent federal regulations in the name of greed,” said Peter T. Edge, Special Agent in Charge of U.S. Immigration and Customs Enforcement’s Homeland Security Investigation (ICE HSI) in Newark. “When our troops’ safety is put in jeopardy, our national security is also compromised.”

And here I always thought that the purpose of the China arms embargo was to keep weapons and military technology out of the hands of the Chicoms because they were a military threat. Instead it appears that the reason is because they make shoddy stuff. If that’s the reason, is an arms embargo of Taiwan next?

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Nov

15

Pound of Flesh Demanded From Export Defendant


Posted by Clif Burns at 10:30 pm on November 15, 2011
Category: BIS

Chasma Nuclear Power PlantThere was more fallout from the PPG case today. Xun Wang, who was the former manager of the Shanghai subsidiary of PPG, pleaded guilty to one count of conspiring to violate the International Emergency Economic Powers Act in connection with the unlicensed export of EAR99 paint to a party on the Entity List maintained by the Bureau of Industry and Security (“BIS”). As a result of the plea, Wang faces a possible sentence of five years in jail and a $250,000 fine.

At the same time, Wang settled civil penalty charges brought against her by BIS for the same exports. Under that agreement, Wang has agreed to a civil penalty of $200,000 and a five-year denial order. Under the denial order, Wang will be forbidden from engaging in any transactions involving the export of items from the United States. Of course, a five year jail sentence will also accomplish the same goal, since I doubt that federal prisoners can engage in export transactions from jail.

Whatever one thinks of the seriousness of the charges against Wang, wacking her, or anyone else, with both criminal and civil penalties seems to be overkill. There used to be this quaint notion that jail time was the ultimate penalty and was designed to assure that the defendant paid his or her debt to society. But now that is just the starting point, with every other penalty piled on top for good measure. Frankly, I won’t be surprised when I read of an export defendant subjected to jail time, criminal fines, civil fines, denial of export privileges, permanent suspension of his or her driver’s license, three thousand push-ups, five weeks in the stocks in Times Square, eight weeks in a re-education camp, and a pound of flesh.

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