The criminal complaint details three interviews between law enforcement and the defendant. In the first interview, conducted when the defendant was entering the United States through the Miami airport, the defendant allegedly admitted that he had stolen the item in question while serving in Iraq, but denied any knowledge of the International Traffic in Arms Regulations (“ITAR”) or its restrictions on the export of defense articles. In a second interview, conducted ten days later at the defendant’s home, he again admitted taking the item while on duty in Iraq. When asked why he had described the item in shipping documents as “used camera lens (optic),” he said that he did that as a result of instructions from the buyer and not because he was aware of ITAR restrictions on exporting the item.

Subsequently, the agents were given emails from the defendant’s Gmail account. One of these read as follows:

Sir,

Sorry late, I alrady [sic] payment.
Please check your paypal account
This
is ITAR itme[sic],If you ship,Please do not write AN PVS-14/7B or ATILLA-200
If you write invoice ex.car engine parts or car electronic parts ($100-$120)

In a third interview, conducted by telephone, the agent pointed out that the email quoted above mentioned that the ATILLA-200 was an ITAR item and instructed him to falsify the shipping documents. The defendant, according to the criminal complaint, continued to deny “that he knew what ITAR meant” and said that he had been truthful in prior interviews.

One semi-literate email from the Japanese purchaser seems a narrow thread on which to hang the required element of scienter, namely, that the defendant knew that the export was illegal. Certainly the defendant would have had a motivation to alter the shipping documents since he clearly knew that he had come into possession of the item illegally. But whether the email’s single reference to “ITAR itme” should have sent the defendant off to Wikipedia prior to shipping the item seems doubtful at best. It is equally reasonable to suppose that the defendant believed that ITAR was a garbled misspelling for some other word or was a Japanese term or any of a number of other possibilities. Indeed, if the defendant was dumb enough to list the item on eBay, it is not hard to imagine that he had no clue what the ITAR was or that the items required an export license.

The indictment describes an alleged conspiracy by the three defendants, all employees at Gulf Coast Cold Storage, to remove dressed chicken carcasses from blast freezers before they had reached certain temperatures required by the trade agreement between the U.S. and Russia. In other instances, the defendants were alleged to have put chicken that reached higher than permissible temperatures back into the blast freezers.

Why, you must be asking, is the U.S. concerned about exports of warm chickens to Russia? Can they be weaponized into chicken wings of mass destruction? Will the warm chickens be served, pathogens and all, to Russian political prisoners? No, the warm chickens became criminal export violations through the wondrous intervention of the federal prosecutor’s jack-of-all-trades and catch-all statute, 18 U.S.C. § 1001, a/k/a the Martha Stewart law, which can transform almost any activity otherwise legal under U.S. law into a federal crime. Just as Martha Stewart went to jail for lying about perfectly legal activities, so the Pascagoula Three risk jail time for an allegedly untrue statement on an export certificate with respect to processing techniques that would not themselves have violated U.S. law.

When required by importing countries, as is the case with Russia for poultry exports, the Food Safety and Inspection Service of the U.S. Department of Agriculture will issue an export certificate attesting that the product complies with the importing country’s requirements. The exporter fills out an application for that certificate on FSIS Form 9060-6 which has a certification at the end that “the product covered by this application for export meets the inspection requirements for the country of destination.” This was the alleged false statement that served as the basis of the 18 U.S.C. § 1001 charge.

In order to sustain a conviction under 18 U.S.C. § 1001, the prosecution must demonstrate that the defendants knew that their statements were false. United States v. Yermian, 708 F.2d 365 (9th Cir. 1983). Here that means that the prosecution must show that three guys working in a blast freezer in Mississippi were familiar with Russian law on chicken processing. That seems to be a heavy burden, although the indictment suggests that one or more of the defendants told others to report false chicken temperatures, which I suppose will be argued as proof that they knew the temperature requirements of Russian law.

And the moral of the story? It’s this: there is no product so benign or inconsequential that someone can’t figure out how to send you to jail for exporting it.

The violations were voluntarily disclosed by Mattson. According to an SEC filing, the disclosure occurred in 2008 and the violations were said to be “inadvertent.” None of the transducers were shipped to Iran. However, transducers were shipped to Israel, Malaysia, Singapore, PRC and Taiwan and were valued at “approximately $78,000″ according to the Charging Letter.

BIS disputed that the exports were inadvertent and claimed that, even though “in May 2006, one of Mattson’s supply chain partners informed it that pressure transducers that Mattson [used] required export licenses when shipped to Mattson customers in certain foreign countries,” Mattson went ahead and shipped these items without license. As a result, BIS fined Mattson $850,000, suspending all but $250,000 of that fine, which is still a hefty fine for matters that involved $78,253 in exports and were voluntarily disclosed. (I know, I know, the agency could have fined Mattson 43 trillion dollars — actually $11,750,000 at $250,000 for each of the 47 counts — but decided to cut Mattson some slack.)

One interesting takeaway from this case — other than that VSDs can be expensive — is how it appears that Mattson got into trouble here. Mattson, according to its website, “designs, manufactures, and markets semiconductor wafer processing equipment used in the fabrication of integrated circuits.” Apparently, these machines utilize pressure transducers; and it is likely that the transducers at issue were shipped as spare or replacement parts for these machines to foreign customers that had purchased Mattson’s processing equipment. The machines themselves may have been classified as EAR99. Often companies do not realize that even if a system may not require an export license, its component parts might when shipped separately from the system. That is an understandable area of confusion and likely what, at least in part, happened here. An essential part of export training is to teach employees that parts and components may have different ECCNs from the equipment to which those parts and components belong.

First, here’s what the story reveals about the Georgia Tech voluntary disclosure. According to the story, a research scientist at the university wanted to put course materials and videos of his lectures for his course “Infrared Technology and Applications” on a DVD because he was planning to retire and he wanted to use these materials to train his successor. When the university’s media staff encountered problems putting the video and materials on DVD, they suggested making the information available by a link. The research scientist approved this idea, thinking that it was an internal link, whereas it was an ordinary Internet link. The material was available online for about three weeks before the mistake was discovered and the materials were taken down. Although the video received hits only from the United States, some of the Powerpoint slides that were posted received hits from foreign countries, including 33 from China and one from Iran. The university disclosed this lapse to the Directorate of Defense Trade Controls which issued a warning letter but imposed no penalties, something which appears to have scandalized the Bloomberg reporter.

Above and beyond the description of the Georgia Tech voluntary disclosure, the article takes a Chicken Little approach to the dangers posed to national security by university research:

Eager to preserve their culture of openness and global collaboration, campuses are skirting — and even flouting — export-control laws that require foreigners to hold government licenses to work on sensitive projects.

To support this startlingly broad conclusion, the reporter humps the Roth case for all it is worth and cites some voluntary disclosures by several universities. That doesn’t much sound like “flouting” export rules to me, but perhaps Bloomberg has a different definition of that word.

For those familiar with the sorts of information which may be export-controlled (but not classified), it is hard to get too worked up about the national security implications of this. After all, business proprietary information about how to make handcuffs is controlled under the Commerce Department’s rules. Suffice it to say, things that are of real concern are classified. Accordingly, I am not scandalized when voluntary disclosures by universities relating to deemed exports result in warning letters rather than jail time for everyone involved as the reporter seems to think is appropriate. And because “fundamental research,” which is exempted from export controls, is an incredibly vague term that is difficult to apply in many contexts, overzealous enforcement of export rules to university research would have an unwarranted chilling effect on that research given the number of foreign students at almost every college and university. Well, I suppose colleges could adopt an American-only admissions policy, and I wouldn’t be surprised if there weren’t certain advocates of deemed export controls who secretly wish for such national homogeneity at our institutions of higher learning.

As is typically the case, BIS provides only scant detail about what got these three parties into hot water beyond saying that they had been involved in the transhipment of items to Iran and Syria. Looking at the identity of the parties allows one to make some more reasonable assumptions about what was going on. One of the designated entities was Canada Lab Instruments in Montréal, which describes itself in a business directory as “supplying a wide range of environmental, laboratory, measuring and analytical instruments for researching and educational purposes from the most famous manufacturers.” The second entity, Abou Elkhir Al Joundi, is an individual who owns Canada Lab Instruments and was educated in Damascus, Syria. The third entity was “Masound [sic] Est. for Medical and Scientific Supplies” in Amman, Jordan, which describes itself in a business directory as involved in the distribution of medical and scientific laboratory equipment.

It seems, therefore, reasonable to assume that the three entities were put on the Entity List in connection with shipment of medical and lab equipment from Canada and through Jordan to Syria and Iran. The quantity and value of the shipments, however, cannot be determined and the BIS order gives no indication. This also does not seem to involve items of particular concern to the interests of the United States in Iran and Syria, particular since the medical equipment probably would have been eligible for licenses. But I guess if we are chasing folks for selling nail polish to Iran, everything is fair game.

As a side issue, if BIS wants to put people in jail for future unlicensed exports to the Jordan company, it at least ought to spell the name of the company correctly on the list establishing this license requirement. It’s “Masoud,” not “Masound.”

Civil disobedience and export laws: those are two concepts not often linked together. But it appears that a Dutch researcher on the H5N1 avian virus is planning to tell Dutch authorities to take a hike and will submit his research to a U.S. journal even though the Dutch government has declared that the research is export-controlled.

This issue was discussed in an earlier post on this blog that discussed how decisions by U.S. researchers to restrict dissemination of some research on the bird flu virus might disqualify the research from the fundamental research exception and make it difficult to share the research with colleagues in other countries. Those restrictions were ultimately removed and the research is not considered export controlled in the United States. Dutch authorities have relied on those initial restrictions to declare the research controlled and have told the researcher that he could not submit the research to foreign journals for publication.

Now Fouchier [the Dutch researcher] says that he is prepared to defy the government and submit the work anyway, an action that could cost him up to 6 years in prison or a $102,000 fine. …

“We simply will never apply for an export permit on a scientific manuscript for publication in a journal. We do not want to create a precedent here,” he told Nature. “We might end up in court indeed if they insist on censorship.”

As an unrelated update, this blog yesterday posted on the $450,000 fine levied on Essie Cosmetics for exports of nail polish to Iran. Several readers have emailed me to suggest that the high fine was based not on the strategic implications of nail polish exports but on, shall we say, an uncooperative attitude by Essie in dealing with OFAC. That’s not hard to believe because, notwithstanding Essie’s expensive dust-up with OFAC, the cosmetic company’s website still has Iran in the drop-down list of countries in forms on its website.

The apparent violations relate to Essie and Individual’s knowing sale and export of nail care products on or about September 17, 2009, December 8, 2009 and February 23, 2010, to an Iranian distributor pursuant to an Exclusive Distributorship Agreement in apparent violation of § 560.204 of the ITR.

Well, it must have been boatloads of nail polish, right? No.

The total transaction value for the three transactions settled with OFAC was $33,299.

I guess the thinking was that it is pretty hard to enrich uranium, build nuclear weapons, threaten our allies, and engage in general terrorist activities if you aren’t wearing nail polish. I don’t know about you, but I’ll sleep better tonight knowing that a few people with unpolished nails are sitting at home rather than working on nuclear bombs.

Instead of breaking out the cake and the champagne to fête the MTCR, we have decided at Export Law Blog to use this opportunity instead to ask why the State Department, instead of sending a birthday card to the MTCR, does not spend the time more productively to fix section 121.16 of the International Traffic in Arms Regulations. That section bears the misleading header “Missile Technology Control Regime Annex,” even though it bears as much resemblance to the current MTCR Annex as Ron Howard does to Opie Taylor. Since that section was added to the USML in 1993 items have come and gone on the MTCR annex like rock singers in rehab clinics and yet nary an amendment has been made to that section.

This, of course, opens up plenty of possibilities for confusion and unintentional hilarity (if you think that sloppy regulations are humorous). Recently, I had a client notice that a rather ubiquitous item was listed in section 121.16 which the client (and many others) had been exporting freely and without even thinking of a license for quite some time. The item had been removed from the MTCR Annex when the Annex was a mere toddler and only taking its first steps. The client had a legitimate query: is this item on the USML or not?

The answer to that question is far from clear at least based on the actual language of the ITAR. The only part of the ITAR even bearing on the question is section 120.29(c) which I think says — your guess is as good as mine — that the items in section 121.16 are the list of all items on the MTCR which aren’t on the Bureau of Industry and Security’s Commodity Control List, although that statement is, now, patently untrue.

So more for amusement than anything else, I called the DDTC Response Team to ask the simple question: if an item listed in section 121.16 is no longer on the MTCR is it still export controlled? You would have thought that I posed Bishop Berkeley’s famous question: “If a tree falls in a forest and there is no one to hear it, does it make any sound?” After a stretch of silence, and some mutterings, the Response Team member finally solemnly informed me, somewhat tentatively, that it was. Oh dear. If that’s true, everybody now exporting that item is going to be in for some fun times, I thought.

I was fairly convinced that the best, and only, way to read 121.16 was that it was intended to state what things that were on the Annex in 1993 were controlled by BIS and what things were controlled by DDTC and that it was the Annex which determined what was controlled and what was not. So I escalated the question up through DDTC and I did receive that answer ultimately from the agency: if an item is no longer on the MTCR, it does not require a license from DDTC simply because it is still referenced in section 121.16.

So, Happy 25th Birthday, MTCR! Here’s to hoping that before you turn 30 somebody will finally fix section 121.16.

To address this concern, the decision was initially made to restrict publication of the study and related materials and to make them available only to designated researchers and government officials with “a need to know.” What apparently no one realized was that this would prevent the research from falling within the fundamental research exception and would, therefore, prevent cross-border discussions or transfer of the information without specific governmental authorization.

Once this was realized, the decision was made to eliminate the “need to know” restrictions and simply to publish the materials so that the research could be considered fundamental research and could be shared freely with researchers in other countries. But the government of the Netherlands is arguing that the publication of the research could not undo the effect of the earlier decision to restrict dissemination and that therefore the research could not be exported from the Netherlands without approval of that government.

This situation illustrates the difficulty in applying the fundamental research in practice. To begin with, there is no easy way to determine what is or is not fundamental research. Export lawyers and export professional at universities have tried to strengthen the case that research is eligible for the fundamental research exception by pointing to whether research was published or, even if not published, was permitted or required to be published under applicable grant contracts or university rules.

The conundrum here is whether sensitive material can be transformed into fundamental research simply by publication. If one group of researchers decides to release the information, does this act of a few individuals instantly transform the information into fundamental research? But if publication isn’t the standard for deciding what is fundamental research, what other standards are available and who should be able to apply those standards? What these questions without answers demonstrate more than anything else is the slippery slope that we head down when we try to apply export controls to information. Rather we should rely on classification rules and procedures to control dissemination of truly sensitive information.

Now it appears that Iran might even more effectively prohibit U.S. exports of services and software incidental to personal communications over the Internet. According to this story in Ars Technica, the Iranian government is planning to create a national intranet and cut off access to the Internet for ordinary citizens in Iran, possibly as early as October 2012. The source for this story is a report by Reporters Without Borders entitled Enemies of the Internet

After a number of other outlets picked up the story, Iran is now claiming, somewhat bizarrely, that the story of shutting down the Internet in Iran is an April Fool’s day hoax. Seriously, I guess the mullahs sat around and decided it would be hilarious to tell a whopper about the Internet on April Fool’s day. I think the only April Fool is anyone who actually believes the story that the report was an April Fool’s day joke. Iran’s history of pervasive Internet censorship is well detailed in the Reporters Without Borders report, so the idea of a “clean” national intranet in Iran to replace the real Internet hardly strains credibility.