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Archive for January, 2012

Jan

10

Twenty IED Jammers in a Jam

Posted by Clif Burns at 9:02 pm on January 10, 2012

Miljam 350 Law students always chuckle at forfeiture cases because they have the best names, such as United States v. 3,462 Cans of Tuna Fish or the like. It always seemed so unfair to those cans of tuna to have the entire juridical apparatus and force of the United States arrayed against them. Poor cans!

So I’m hoping that readers will be equally amused by an export law forfeiture case that is titled United States v. Twenty Miljam 350 IED Jammers and that was recently decided by the Second Circuit Court of Appeals. The twenty jammers at issue were manufactured by an Israeli company called Wireless Avionics. They were seized by Immigration and Customs Enforcement during a criminal proceeding against the CEO of the company for attempting to export these items without a license from the Directorate of Defense Trade Controls. They had been manufactured for sale to NATO, but DDTC had denied an export license claiming that the devices would interfere with radios used by U.S. forces in Afghanistan. The CEO then tried to disassemble them and export them from the U.S. for reassembly and sale elsewhere, which led to the seizure of the jammers, his arrest and a criminal indictment.

Now comes the odd part. For reasons not clearly explained by the Second Circuit opinion, the U.S. dropped all criminal charges provided that the CEO agreed to waive any future claims against the U.S. and the ICE agents for false arrest and to waive any objection to the forfeiture of the devices. The CEO, however, contested the forfeiture claiming that he was forced to sign the release under duress, the duress apparently being the threat of criminal prosecution. He also argued that the items were not on the United States Munitions List and did not require an export license. The Second Circuit dismissed the duress claim in large part based on a letter that the CEO sent after signing the waiver in which he said he had signed it voluntarily. And although the court notes that items on the USML require a license, it does not discuss whether these items were on the USML or not.

The Wireless Avionics website asserts that these devices are covered by “ECCN class 5.A.1.h,” presumably a reference to ECCN 5A001.h. That ECCN has a somewhat cryptic note that says “See also . . . Category XI of the International Traffic in Arms Regulations.” It would seem that whether an IED jammer fits under ECCN 5A001.h or Category XI of the ITAR would depend on whether it was specifically designed, modified or configured for military application.

Here the fact that the products were destined for NATO and were called — of all things — by the model name “Miljam” both suggest the items might well be Category XI. But then it’s hard to understand why the government folded like cheap lawn chairs and tried to get a promise that no one would get sued for false arrest. It also doesn’t help the Wireless Avionics case here that it applied for a license from DDTC which was denied. On the other hand, there is nothing to indicate that these jammers had been ruggedized, shielded or otherwise specifically adapted for military vehicles.

Because all we can do is speculate about the Government’s action here, speculation is welcomed in the comments section.

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Jan

9

Understanding the Law You Enforce and Other Minor Details

Posted by Clif Burns at 7:15 pm on January 9, 2012

Category: ICE • USMIL

AD-4N Skyraider Apparently it is not a job requirement at Immigration and Customs Enforcement to have to understand the laws that you are charged with enforcing, as this recent press release from ICE illustrates all too well. The press release announces the forfeiture of a Douglas AD-4N Skyraider and associated parts that were alleged to have been illegally imported into the United States.

Now let’s hear about the case from Special Agent Raymond R. Parmer, Jr., who quickly reveals that he doesn’t understand at least some of the laws that the taxpayers pay him to enforce:

“The Skyraider aircraft, its cannons and parts are all subject to import licensing requirements as â€˜defense articles’ under the Arms Export Control Act. Federal law prohibits the importation of defense articles without a license or permit,” said Raymond R. Parmer, Jr., special agent in charge of Homeland Security Investigations (HSI) in New Orleans. “ICE aggressively investigates these cases in order to deter this type of illegal activity and protect those who abide by our nation’s laws.” Parmer oversees responsibility for the states of Alabama, Mississippi, Arkansas, Tennessee and Louisiana.

Er, no. The aircraft and the cannons are subject to import licensing requirements as “defense articles.” The parts, well, not so much. Permanent imports of defense articles into the United States are governed by the United States Munitions Import List, which is a subset of the United States Munitions List. Not everything on the USML requires a license for permanent (as opposed to temporary) import into the United States. And aircraft parts are one of those things.

Aircraft parts are covered by Category VIII(h) of the USML. Now let’s take a look at Category VIII of the USMIL:

NOTE: Category VIII (b) through (j) and Categories IX, X, XI, XII and XIII of â€˜â€˜Munitions Listâ€™â€™ deleted as inapplicable to imports

Oops. Maybe Agent Parmer ought to try actually reading the USMIL before speaking up in a press release about what does and does not require an import license.

Not surprisingly, this is not the first time of which I am aware where ICE agents failed to understand that the USML and the USMIL are not co-extensive. I was involved in a case where my client was being prosecuted for illegal exports that the client was alleged to have made to undercover federal agents. During the course of plea negotiations, an ICE agent came zooming in with an announcement that Customs had seized some military electronics that my client was said to be illegally importing without a license, citing Category XI of the USML. The agent urged additional criminal charges and the end of the plea-bargain discussions. I pointed out to the U.S. Attorney involved that Category XI was not on the USMIL and that permanent imports of military electronics did not require a license. He was sufficiently irate over the ICE agent’s misrepresentation of applicable law that he made the agent personally deliver the improperly seized items to my client at my client’s facility.

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Jan

5

FedEx Agrees To Pay $370,000 Export Penalty

Posted by Clif Burns at 8:04 pm on January 5, 2012

Category: BIS

FedEx Federal Express has agreed to pay to the Bureau of Industry and Security (“BIS”) a penalty of $370,000 in connection with charges that it aided and abetted one export and five attempted exports between 2004 and 2006 without required export licenses. Three of the attempted exports were to Syria and the other two were to the Mayrow Trading Company in Dubai which had been subjected to a license requirement by BIS in General Order No. 3 issued on June 5, 2006. The remaining violation, and the only actual export, involved a shipment to a company in China on BIS’s Entity List.

Interestingly, the Settlement Agreement only provides for the payment of the $370,000 fine. There are no provisions, as are now often seen in these agreements, requiring enhanced compliance procedures or export audits.

A spokesman for FedEx, speaking today to a Memphis newspaper, described the violations as “inadvertent and very limited.” This certainly makes sense for the attempted Mayrow exports, which occurred in July 2006, only a month after General Order No. 3 imposed the license requirement on exports to Mayrow. Because Mayrow and the other companies listed in General Order No. 3 were not immediately put on the lists that exporters customarily checked, the FedEx error here is understandable.

The statements from the FedEx spokesman also indicate that the exports were discovered and stopped by the government based on the Automated Export System filings made by FedEx in connection with the shipments. That being the case, it is clear that FedEx had not attempted to disguise what it was doing and that its own compliance procedures had not flagged the problematic shipments.

The settlement documents provide no indication as to what actions, if any, were taken against the FedEx customers that initiated these shipments.

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Jan

4

We’re Not Done Yet

Posted by Clif Burns at 9:01 pm on January 4, 2012

Category: DDTC • Part 129

Arms Bazaar Another problem with the arms brokering regulations proposed by the Directorate of Defense Trade Controls (“DDTC”) is their jurisdictional scope, which is impossibly vague and far exceeds the scope of permissible regulation under the Brokering Amendment which was passed by Congress and which permitted DDTC regulation of arms brokers in the first place.

So let’s start with vague. Under the current rules, the rules’ requirements of registration and approval apply to foreign brokers “subject to U.S. jurisdiction.” Normally this would mean foreign persons with sufficient contacts with the U.S. so as to permit jurisdiction over them consistent with the due process clause. DDTC has been arguing that this should also include any foreign person who has any contact with U.S.-origin defense articles. The new rules would codify this remarkable and extraordinary claim for the permissible scope of U.S. jurisdiction. stating that its requirements cover activities of:

any foreign person located outside the United States involving a U.S.-origin defense article or defense service.

Notwithstanding the numerous ways that U.S.-origin can be defined the proposed rules are completely silent on what constitutes a U.S.-origin defense article. Is a tank with one lugnut made in Grand Rapids a U.S.-origin article. Or is there a requirement that U.S. parts constitute at least 50 percent of the value of the item? Or does it require that a substantial transformation or tariff classification shift occur in the United States. The new rules provide absolutely no guidance, largely because, I suppose, DDTC sees the United States as having unlimited jurisdiction over foreign persons, and therefore, the agency intentionally wishes to keep this concept vague.

Whether or not the U.S. has such broad jurisdiction, it is quite clear that when Congress passed the Brokering Amendment which authorized these rules in the first place, it didn’t intend to confer such broad jurisdiction. As I detailed in this article (subscription required) back in 2006 in Export Practitioner, the House Report on the Brokering Amendment makes it crystal clear that Congress only intended to cover “U.S. persons (and foreign persons located in the U.S.).” It does not authorize DDTC to try to exert jurisdiction over foreign persons outside the United States that may have some connection to a defense article that has one U.S. part in it.

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