Author Archive


May

14

eBay Busts Soldier in Iraq for Illegal Exports


Posted by at 5:24 pm on May 14, 2012
Category: Criminal Penalties

Atilla-200A recently filed criminal complaint accuses a former U.S. soldier of using eBay to export military items he obtained while serving in Iraq. Specifically, the defendant is accused of the unlicensed export of an Atilla-200 laser aiming device to Japan. The complaint details communications between eBay and the defendant which suggests that eBay tipped off federal investigators as to the export of the Atilla-200. As is often the case with criminal export prosecutions, the central issue in the case is whether the defendant had criminal intent since there seems to be little doubt that the export occurred and that no license was obtained.

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.

Permalink Comments (2)

Bookmark and Share


Copyright © 2012 Clif Burns. All Rights Reserved.
(No republication, syndication or use permitted without my consent.)

May

8

Dead Chickens By Sea: A Hard Warming Story


Posted by at 5:30 pm on May 8, 2012
Category: Agricultural Exports

Gulf Coast Cold StorageUsually criminal export defendants are in the dock for exports of night vision, stun guns, or high-tech chemical processing equipment. Today we have criminal defendants who were indicted for exporting insufficiently chilled chickens from Pascagoula, Mississippi to Russia, proving, I suppose, that even exporting chickens can be a dangerous business these days.

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.

Permalink Comments Off on Dead Chickens By Sea: A Hard Warming Story

Bookmark and Share


Copyright © 2012 Clif Burns. All Rights Reserved.
(No republication, syndication or use permitted without my consent.)

May

7

The Sum of the Parts May Sometimes Be Greater than the Whole


Posted by at 6:39 pm on May 7, 2012
Category: BIS

Mattson TechnologyThe Bureau of Industry and Security (“BIS”) recently released documents detailing a settlement that it entered into with Mattson Technologies relating to Mattson’s unlicensed exports of pressure transducers classified under ECCN 2B230. That ECCN covers pressure transducers with pressure sensing elements made of aluminum, nickel or certain alloys thereof and which meet a certain standard of accuracy set forth in the ECCN. Transducers of those specifications are needed for centrifuges producing weapons-grade uranium, and there is some evidence that the Iranians are actively acquiring or trying to acquire such devices.

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.

Permalink Comments (2)

Bookmark and Share


Copyright © 2012 Clif Burns. All Rights Reserved.
(No republication, syndication or use permitted without my consent.)

Apr

30

Danger, Danger, Will Robinson! Deemed Exports Ahead!!


Posted by at 6:51 pm on April 30, 2012
Category: BISDDTCDeemed Exports

Medical LabA long article published today on the Bloomberg News website tells the story of a voluntary disclosure by Georgia Tech after one of its instructors inadvertently posted some export-controlled data on the Internet. The article follows this anecdote up with a ton of (virtual) ink about how universities are giving away all of our military secrets and how we shouldn’t be surprised when this results in the U.S. becoming a satellite province of China or Iran.

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.

Permalink Comments (6)

Bookmark and Share


Copyright © 2012 Clif Burns. All Rights Reserved.
(No republication, syndication or use permitted without my consent.)

Apr

25

Lab Equipment Companies Added to Entity List


Posted by at 7:30 pm on April 25, 2012
Category: BISIran SanctionsSyria

Medical LabLast week the Bureau of Industry and Security (“BIS”) added three parties to the Entity List and imposed license requirements for exports, re-exports and in country transfers to these parties for all items subject to the Export Administration Regulations, i.e., items exported from the United States or with certain percentages of U.S. content. The order adding the parties to the Entity List indicated that there would be a presumption of denial for all license applications involving the three parties.

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.”

Permalink Comments Off on Lab Equipment Companies Added to Entity List

Bookmark and Share


Copyright © 2012 Clif Burns. All Rights Reserved.
(No republication, syndication or use permitted without my consent.)