According to the indictment, which was unsealed on Monday, the defendant Philip Chaohui He owned and operated a company called Sierra Electronic Instruments, of which he was the only employee. Estimated sales revenues for 2010 were $110,000. I was unable to locate any website for the company, and the company’s web footprint consisted of two sparse directory entries.

Even so, He and Sierra got their hands on $549,654 worth of radiation hardened, space qualified memory chips from Aeroflex, a Colorado Springs chip designer and manufacturer. Seven months later, He drove his car to the Port of Long Beach and to a PRC-flagged ship there which had recently arrived from Shanghai and was scheduled to return in a week. The chips in question were in the defendant’s trunk concealed “in several plastic infant formula containers placed inside five boxes which were sealed and labeled as “milk powder” written in Chinese.

The indictment doesn’t describe what happened next, but it’s pretty clear. The federal agent that had been tailing Mr. He informed his buddies who swooped down on Mr. He, waving guns and shouting typical law enforcement stuff at him before dragging him away in handcuffs. The indictment suggests that before the dockside bust, the feds had snooped into his bank account and phone records and identified numerous phone calls to the PRC and, more ominously, two wires from the PRC to Mr. He totaling just under $500,000. As a result, Mr. He’s careful concealment of the goods in baby formula was a waste of time.

It doesn’t take a rocket scientist to guess what happened here. Obviously, Aeroflex smelled a rat when this one-man storefront operation wanted to lay his hands on a half-million dollars worth of highly specialized space-qualified circuitry, so they alerted the authorities. All the while Mr. He was agonizing over whether it was safest to hide the goods in baby formula, cans of dog food or boxes of knitting needles, he was already a marked man. Had he gone in for a smaller amount (for which he certainly would have been paid less) he might be basking in the Southern California sun. Indeed, he reminds me of the would-be bicycle thief who tried to walk out of my condo building’s parking garage with two bicycles rather than racing off swiftly on one bicycle.

He went down too.

Simultaneously with the executive order, the Office of Foreign Assets Control issued two new general licenses — cleverly named General License A and General License B — that would nevertheless permit certain transactions involving the newly blocked parties. It also updated the FAQs on the OFAC website to provide further explanations of the effect of the executive order and the two new general licenses.

The first fear that you might have is that the blocking of the Government of Iran and all Iranian financial institutions might effectively end certain transactions authorized under the ITR, say, for example, the payment of fees in connection with the registration of trademarks in Iran permitted under section 560.509 of the ITR. General License A was issued to take care of that. It permits activities already authorized under specific licenses or general licenses issued under the ITR. “General license” in this context doesn’t just refer to documents titled “General License” like this General License A but also refers to activities specifically authorized by the regulations itself, like the previously mentioned authorization of certain activities relating to trademarks in Iran. General License A specifically excludes from its scope transactions relating to closing or liquidating Iranian accounts otherwise authorized by section 560.517.

General B permits non-commercial personal remittances as long as they are not made through Iranian banks or other entities that were previously blocked, such as Bank Saderat or Bank Melli, not including the Iranian financial institutions that were blocked by this latest executive order.

According to the story, twenty-nine Holstein bulls have already been exported to Russia and another thirty are to follow. The bulls are set to, er, revitalize (at least that’s what the kids call it now) Russian Holstein dairy herds. The need for bulls with that certain American panache was explained as follows in the story:

Russian farmers want American bulls to improve dairy-herd genetics in a land hampered first by collective farming, then by the collapse of the Soviet Union. …

Instead of raising dairy cattle for milk and beef cattle for meat, Soviet collective farms had “dual-use” cattle, which would be milked for a while, then killed for meat, Osipenko said. Those one-size-fits-all cattle may have embodied an egalitarian ideal, but both milk and meat were mediocre, said Osipenko, a native of Ukraine who recalled his mother boiling beef for hours in a fruitless attempt to tenderize it.

After the Soviet Union collapsed, many dairy herds were all but wiped out as hungry Russians consumed them for food.

“There was a terrible crisis, apparently, and they pretty much ate their seed stock,” said Patrick Comyn, a large-animal veterinarian with the private Virginia Herd Health Management Services who worked on the deal.

And that’s where the exported bulls come in. I am sure that the Virginia bulls will be delighted, to the extent that bulls can be delighted in the first place, that they are fulfilling both a carnal and a patriotic duty.

Of course, these mail-order American husbands may never have seen their wealthy Russian wives if they had been horses because, as all export geeks know, export of horses by sea (ECCN 0A980) requires a license from the Department of Commerce. Personally, I think this is another example of wanton discrimination against American cows in favor of American horses which are spared from both the dinner table and long ocean voyages.

Seyed Mojtaba Atarodi, a professor at Tehran’s prestigious Sharif University of Technology was arrested on December 7, 2011, when he stepped off a plane in Los Angeles where he had arrived for a medical visit to his brother’s cardiologist. The criminal complaint against him is sealed and the arrest was only made known because his name shows up in the Federal Bureau of Prisons inmate locator.

A bail hearing was held last week and Atarodi has been released on bail, partly due to his health problems. He has recently had two heart attacks, two heart surgeries and a stroke. Articles published by Atarodi that can be found on the web appear to deal mainly with semiconductor and microchip technology without any specific defense applications.

The U.S. government has still not released any information on the charges against Atarodi, although it is widely, and legitimately, assumed that they are export related. A spokesman for Sharif University said that Professor Atarodi was charged with buying scientific equipment from the United States, stating:

He was trying to buy some equipment for his lab, and the equipment was very, very simple, ridiculously simple stuff that anybody can buy. …

An official statement released by Sharif University, which appears to be aware somehow of the items mentioned in the indictment, said this about the items in question:

The items mentioned in the indictment, if truly purchased by him are all simple, basic, and elementary components and equipment that are easily sourced and can be found in every electrical engineering department. It is so disappointing to note that most of the items in question are not even the so called “dual use” equipment.

Of course, the Iran sanctions cover all items of any sort exported from the U.S., although an arrest and criminal prosecution is rare for items without some further strategic significance.

Even though the U.S. government’s lips are sealed, Atarodi’s defense counsel is not quite so taciturn and said to the Associated Press reporter that his client was more or less guilty:

Kohn said prosecutors “meticulously” built their case against Atarodi, who had come to Los Angeles seeking treatment from his brother’s cardiologist.

Meticulously? A statement like that, if he has been accurately quoted, makes you wonder which side of the case the defense attorney is being paid to argue. I suppose that if the government case is so “meticulous,” the alleged defense attorney can just teach Mr. Atarodi how to say “guilty” in English, collect his CJA reimbursement, and wait for another appointment.

The real impact of this is that this may well signal the end of legal exports of agricultural products, medicine and medical devices to Iran under the authority of the Trade Sanctions Reform and Export Enhancement Act of 2000, or TSRA (tis’-ruh) in Exporteranto, the lingua franca of export professionals. Exports to Iran licensed by OFAC require that the exporter must deal directly with a non-Iranian bank and that the non-Iranian banking intermediary may not use an Iranian bank on the SDN List to complete the financial aspects of the transaction.

Here is a link to a comprehensive list of Iranian financial institutions on the SDN List. As you can see, the U.S. has now designated what I believe to be all Iranian banks that are involved in international financial transactions. Here is a list on Wikipedia purporting to be all the private banks in Iran, but I am unaware of whether any of these other banks are able to engage in international transactions, although the website of EN Bank suggests that it may be able to handle international financial transactions.

That may mean, I’m afraid, that as a practical matter, TSRA exports to Iran will be cut off because there is no way for the U.S. exporter to be paid. If anyone is aware of any other banks that can be used for TSRA exports to Iran and that are not on the SDN List, please share that in the comments section.

Couple this with OFAC’s recent action putting most (and perhaps all) shipping ports in Iran on the SDN List when it designated Tidewater Marine, the executive branch has now effectively nullified the intent of Congress when it passed TSRA. This nullification could easily have been avoided if OFAC issued (or issues) general licenses that permit licensed TSRA transactions to use Iranian banks even if they are on the SDN List and to use ports on the SDN List for licensed TSRA transactions. But there is no indication that this is going to happen.

Of course, in the present environment, it is unlikely that Congress will protest this de facto executive repeal of the act.

The story begins in June 2006 when an unnamed company in Singapore sought to order certain military antennae from Microwave Engineering. In preparation for requesting an export license, Microwave Engineering asked the Singapore company to execute a Form DSP-83 (Nontransfer and Use Certificate). When the company, citing its own internal policies, refused to sign the DSP-83, the sale and export were cancelled by Microwave Engineering’s export compliance officer.

When Cheung learned of the cancellation of the sale, he contacted another Massachusetts company, and agreed with that local company that it would purchase the military antennae and ship them to the company in Singapore. Thereafter, the local company purchased antennae from Microwave Engineering and exported them without license to the company in Singapore. The local company also purchased antennae from Microwave Engineering for export to another company in Singapore, Corezing International. Corezing is subject to another indictment, and the U.S. is seeking extradition, in connection with its role in the exports of radio modules from the United States to Iran which were later found in improvised explosive devices in Iraq.

The criminal information alleges that Cheung was aware that the purchases by the unnamed local company were destined for the customer in Singapore and that he took no action to stop these exports or to obtain the required licenses from the Directorate of Defense Trade Controls (“DDTC”).

Moral of the story: if your export compliance officers stops a sale, it is probably not a good idea to try to find another way to make the sale.

Any U.S. companies doing business with the Thai government are going to have to exercise some additional caution after Thailand’s Prime Minister Yingluck Shinawatra appointed Nalinee Taveesin as PM’s Office Minister. Ms. Taveesin is on the SDN List maintained by the U.S. Department of Treasury’s Office of Foreign Assets Control (“OFAC”). U.S. persons are forbidden by law to engage in any transactions with individuals on the SDN List.

Ms. Taveesin was placed on the list because of her alleged involvement in various transactions with Grace Mugabe, the wife of Zimbabwe’s President Robert Mugabe. Taveesin claims it’s all a huge misunderstanding, that she never was involved in any business deals with Grace Mugabe, and that she merely had become friends with Grace Mugabe when she came to Thailand for a New Year’s holiday vacation.

The issue now is whether Ms. Taveesin’s presence on the SDN list has any impact on business deals with the Thai government in which she may be involved. The SDN list would seemingly bar transactions with her both in her private and in her official capacity. OFAC has, at least in the case of the Palestinian Authority, held that the presence of sanctioned individuals in a government agency or body could prevent transactions with the government agency itself, effectively eliminating any notion that someone can be sanctioned vis-à-vis their private activities but not their official governmental activities.

I’ll have to be honest and say that I have no idea what the PM’s Office Minister in Thailand does, but U.S. businesses doing business with the government of Thailand should be wary and make sure that Ms. Taveesin has no connection with, or involvement in, the transaction.

Three entries on the list, two for a high mobility electron transistor (“HMET”) and one for a microwave monolithic integrated circuit (“MMIC”), indicate that the correct classification for these items is ECCN 3A982. The problem is that there is no ECCN 3A982, and there has never been, at least that I could find.

Well today I came across a notice of a final rule by the Bureau of Industry and Security, dated January 9, 2012, and effective on the same date, which creates a new ECCN 3A982 for HMETs and MMICs. Of course, the mystery remains as to how the DDTC could classify something as ECCN 3A982 before the ECCN actually existed, but I suppose that only bothers people concerned about the rule of law and other minor details.

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.

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 ‘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 ‘‘Munitions List’’ 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.