Jun
16
Seventh Circuit Reverses Export Conviction In Rifle Scope Case
Posted by Clif Burns at 5:12 pm on June 16, 2009
Category: Criminal Penalties • DDTC
Yesterday, the United States Court of Appeals for the Seventh Circuit reversed* a federal district court conviction of Doli Syarief Pulungan for attempted unlicensed exports of rifles copes to Indonesia in violation of the Arms Export Control Act. I previously reported on Mr. Pulungan’s case here and here.
The decision can only be characterized as a complete smack-down of the theory, advanced in most recent prosecutions by the DOJ and the Directorate of Defense Trade Controls (“DDTC”), the State Department’s export licensing agency, that decisions that a particular defense item falls within a particularl USML category are unreviewable under section 2778(h) of the Arms Export Control Act. The Seventh Circuit’s decision also provides an interesting elucidation of how the “willfulness” requirement for an AECA prosecution and conviction should be construed.
In the Pulungan case, in order to prove that the Leupold Mark 4 CQ/T rifle scope was listed on the United States Munitions List (“USML”), the prosecution introduced the testimony of Anthony Dearth, a Division Chief at DDTC. According to the appeals court, Mr. Dearth:
testified that the Directorate of Defense Trade Controls has concluded that the Leupold Mark 4 CQ/T is “manufactured to military specifications” but he would not say what those specifications are or why the Directorate believes that the Mark 4 CQ/T is “manufactured to” them. The decision itself was not produced.
The prosecution then claimed that this determination was not reviewable under section 2778(h) and asked for, and received from the district court, a jury instruction, stating that the rifle scope was, as a matter of law, a USML item and taking that question out of the jury’s hands.
The court disagreed, adopting the interpretation of section 2778(h) that this blog has advanced — namely that the decision of DDTC to put a category of items on the USML is non-reviewable but that the decision as to whether a particular item falls within a USML category is not shielded from judicial review:
Section 2778(h) provides: “The designation by the President (or by an official to whom the President’s functions . . . have been duly delegated), in regulations issued under this section, of items as defense articles or defense services for purposes of this section shall not be subject to judicial review.” (Emphasis added.) So if 22 C.F.R. §121.1 Category 1(f) read “any Leupold Mark 4 CQ/T riflescope”, that designation would be incontestable (even though made by the Directorate rather than the President), and the question for the jury would be whether the item that Pulungan tried to export was indeed a Leupold Mark 4 CQ/T riflescope.
And now for the smack-down and language which can only be characterized as unusually harsh for an appellate opinion:
A designation by an unnamed official, using unspecified criteria, that is put in a desk drawer, taken out only for use at a criminal trial, and immune from any evaluation by the judiciary, is the sort of tactic usually associated with totalitarian régimes. Government must operate through public laws and regulations.
On the willfulness issue, the Seventh Circuit made clear that because DDTC had not made a public determination that the rifle scope was a USML item, it would be difficult to prove that the defendant here knew that it was a USML item and required a license. The court dismissed all of the evidence that the prosecution had proffered as proof of willfulness and criminal intent.
First, the prosecution introduced evidence that Pulungan had printouts of web pages from sellers of the Leupold rifle scope that stated that the rifle scope could not be exported outside the United States. The Court noted that the web pages didn’t say why the items couldn’t be exported. Territorial restrictions imposed on distributors could be one reason. That the pages said that the items couldn’t be exported even with a license further suggests that these restrictions may have been unrelated to U.S. export laws. And the court noted that other web sites advertised these rifle scopes without any mention of export restrictions.
The prosecution also pointed to Pulungan’s efforts to conceal the actual destination of the rifles by claiming that they were going to Saudi Arabia rather than Indonesia and to an email from Pulungan indicating a belief that exports of defense articles to Indonesia violated a U.S. arms embargo. The concealment of the destination and the emails were based on his mistaken belief that Indonesia was subject to a U.S. arms embargo at the time of the proposed exports. The court held that an intent to break a non-existent arms embargo is not sufficient proof of an intent to break the specific licensing requirements of the AECA.
As always, it is always difficult to parse the exact amount of intent and knowledge that is required to prove a criminal export violation. One the one hand, it seems clear that defendants need not know the name of the law or the section numbers of the provisions violated. On the other hand, it’s not enough for the defendant to have a mistaken belief that his conduct violates the law in a manner different from the charges brought by the government. Where to draw the line between those two extremes is a challenge and the Seventh Circuit’s decision doesn’t provide much guidance in this regard.
The court’s ruling, however, on the scope of section 2778(h) is clear and well-reasoned and is likely to have influence on other courts considering the matter. DOJ and DDTC would be well advised to stop trying to hide classification decisions behind a non-existent and improper shield of non-reviewability.
*Free FindLaw subscription required. I’ll update the link when the slip opinion appears on the Seventh Circuit website.
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5 Comments:
In my opinion, the Seventh Circuit got it wrong on at least one major point. There are at least two roads to control under the ITAR on the USML, and the court only examined one of them. The Seventh Circuit only looked to see whether the riflescope in question was specifically listed on the USML. At USML Category I(f), it found only a listing for “[r]iflescopes manufactured to military specifications.” Not finding the Leupold Mark 4 CQ/T specifically listed by name, the court concluded that DDTC’s designation was subject to review by a judge or jury as to whether the specific riflescope in question was manufactured to military specifications.
But there is another road to the USML, in regulation, at 120.3 or the ITAR. DDTC has been delegated the power to designate an item as a defense article if it is specifically designed, developed, configured, adapted, or modified for a military application. Are such determinations excluded from treatment in accordance with 2778(h)?
Similarly, at 120.4(3) of the ITAR, the regulations delegate power to DDTC to determine via a Commodity Jurisdiction that an item is a defense article. Is this determination also excluded from treatment under 2778(h)?
Congressional intent behind 2778(h) is clear: when it comes to designation of items as defense articles, Congress is disinclined to leave such important matters of national security and foreign policy to the lay opinion of a jury or judge. The Seventh Circuit was wrong in undermining clear Congressional intent and failing to address or recognize all of the powers delegated to DDTC, in regulation, to designate items as defense articles.
Moreover, I find it disingenuous that the court finds no relationship between defendant’s belief that he was skirting an arms embargo and defendant’s knowledge that the item was, in fact, a defense article.
Finally, the court notes in its opinion “the web
page for every USB flash-memory stick—a commodity
item that is manufactured outside this nation, and thus
unaffected by export-control laws…” Did I miss something? I was under the impression that a non-US-origin commodity item fell under the jurisdiction of US export-control laws as soon as it entered the US. Then again, I am no judge…
@MJ – 120.3 is not a “separate route” to designation, but is rather the expressed policy that DDTC uses in determining what categories of items to list on the USML. If DDTC wants to put squirt guns on the USML no court can review that, but if DDTC says that a cap pistol is a squirt gun, and then tries to shield that from review by saying it made a secret designation udner 120.3, that would pose a number of problems.
As to what Congress intended in 2778(h), have you read the legislative history? I think it supports that court’s interpretation. I have the relevant passages, and I’ll post them later when I’m at the office.
The court’s analysis on intent isn’t disingenuous but it’s the part of the opinion that other courts might not follow. But I agree with the concept. Courts often look at mis-declarations of the shipment of intent to violate export laws.
But suppose that I believe that it’s legal to export handcuffs from the U.S. but declare the shipment as more expensive items to inflate sales figures on my books? Can I be prosecuted for export violations simply because I intended to break tax or securities laws? The connection between breaking an arms embargo and export laws is, of course, closer than that, but that merely illustrates that it’s hard to draw lines in these intent determinations and that other courts might draw the lines differently. I don’t think it means the 7th Circuit was being disingenuous.
Clif-
In drawing on both this posting, and your recent posting (“eBay Auction Supplied Military Parts to Iranian Air Force”), I see a key issue coming to light. In the example of the oxygen tanks, you wrote that “US export control system is vulnerable when military parts are sold by unsophisticated and inexperienced sellers”. Now, setting aside other misdeeds, intent, or commission of related violations of the AECA or ITAR in the cases you referenced, it seems to me that the flow-down of export control obligations to the domestic, commercial (i.e., civilian) market is left ambiguous. Certainly, we, as exporters, manufacturers, etc., are, or will become, cognizant of our obligations through either due diligence efforts or “cross-pollenization” within the defense industry. At the same time, anyone can wander to the gun counter at Cabela’s, or many other sporting goods retailers, and procure himself or herself a 4-12X Leupold Mark IV with a mil-dot reticle, the same item that put Mr. Pulungan in the crosshairs (unavoidable pun). The average citizen isn’t intuitively aware that a product available in end-item form in a retail environment would, or could, be subject to export control regulations relating to defense articles. Nor does product labeling reflect such an onus. Further, one might arrive at the conclusion that such a commercially available riflescope could escape “defense article” designation vis a vis 120.3 (a) ii, performance equivalent in civil applications. Leupold, in addition to other scope manufacturers, market their wares with the same performance capability in non-“tactical” configuration, with such being available for purchase outside of the law enforcement/ military community without restriction. The marketing designation of “tactical” is commonplace now in the firearms industry, but does not, in my opinion, equate to defense article designation. I think that Cat I (f), riflescopes, etc., only complicates matters by linking to “military specifications”; there are myriad commercial/civil items made to MIL-SPEC, but not specifically/specially designed, modified, etc. for defense. Thanks.
This places the 7th Circuit in conflict with the 9th, and articulates the specific intent with more clarity than recent cases in the 5th and 11th which DoJ claims is trending away from their decision in Davis and Adames. If DoJ is foolish enough to go for cert we could actually see an export case go to the Supremes. These are precisely the issues before the district court in US v. Roth while it mulls over the defendant’s Rule 29 motion and motion for new trial based on the court’s failure to issue an instruction on good faith mistake of law, so the 6th may weigh in soon. I suspect Roth’s counsel will make a supplemental filing. DoJ took the position in its trial brief that DDTC’s post complaint “certification” was unreviewable, even though actuators it certified as Cat. VIII(h) were being tested using a civilian UAV as a testbed.
A decision on Roth’s motions was issued on June 19. Judge Tom Varlan held that the trial court could review whether there was sufficient evidence that an item was a defense article, but not the policy of whether to include a particular class of objects on the USML. His subsequent analysis, however, accepts the DDTC post-facto certification as evidence. There was no discussion of the recent 7th Circuit decision, which came out just 4 days before. The 7th Circuit was more critical of the government’s position that jurisdiction/classification determinations are unreviewable: It went on to criticize DDTC’s process for making such determination. There is at least a colourable argument that under US v. Pulungan, the certifications are not admissible.
Although the court did not find it necessary to go there, its decision is buttressed by the APA/FOIA provisions that agency decisions, opinions, interpretations, and instructions to staff should be public and “adjudications”, which includes licensing, should state the rational for determination. DDTC’s false and fraudulent claim in 128.1 that it is excluded from the whole APA is not supported by the statute or the legislative history. The statutory “foreign affairs function” exceptions do not apply to the entire APA, only to the two sections in which they appear. Furthermore, the 1946 legistive history of the APA compiled by the Senate Judiciary Committee at that time as a aid to interpretation and relied upon by the Supreme Court in other APA cases makes clear that the “foreign affairs function” exception applies to only diplomatic and similar intergovernmental activities within the sphere of the Executive branch which do not affect the public. DDTC’s interpretation and application of ITAR in order to regulate trade and put folks in jail is a delegated plenary power of Congress and certainly affects the public, so absent an express exclusion as in the long expired EAA, APA and FOIA apply to DDTC and ITAR.
