Archive for the ‘BIS’ Category


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.

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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.”

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Copyright © 2012 Clif Burns. All Rights Reserved.
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Apr

11

Bird Flu Research Flies Into Export Laws, Crashes, Then Burns


Posted by at 10:43 pm on April 11, 2012
Category: BISGeneralTechnical Data ExportWassenaar

Bird FluApparently international research on how best to prevent, contain and treat bird flu is now threatened by international laws restricting export of information relating to potential agents of biological warfare according to this report on NPR. The problem concerns research conducted by researchers in the United States and the Netherlands which resulted in a controversial paper concerning alterations in the virus that would make it more contagious. There was some concern that this information might be useful to terrorists and rogue states interested in biological warfare agents.

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.

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Copyright © 2012 Clif Burns. All Rights Reserved.
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Apr

3

Piling On


Posted by at 8:15 pm on April 3, 2012
Category: BIS

Piling OnBack when the Bureau of Industry and Security (“BIS”) was begging Congress to give it authority to increase the amount of penalties it could impose, it said that higher penalties would avoid the need for creative charging letters which allege that a single action constitutes four, five, six or more separate violations. For a while, BIS seemed to stick to its word after Congress essentially gave BIS the power to fine exporters in amounts equal to the gross domestic products of certain small countries.

But good intentions, like party balloons, are ephemeral. Look at the settlement documents recently released by BIS pursuant to which Dresser, Inc. agreed to pay $88,000 to settle charges of export violations. In that charging letter, BIS resurrects from its deserved grave the old practice, thought to be forsworn, of adding a separate count for an S.E.D. violation to each and every export count. The first ten counts allege export of control valves classified as ECCN 2B350 without a license. The next 10 counts are for S.E.D. violations for each of the ten preceding export violations. For nine of the ten S.E.D. violations, the only alleged misstatement was “N.L.R.,” or “No License Required” when in fact licenses were required. Of course, every export violation where an S.E.D. is required and the exporter fails to get a license will necessarily involve this same S.E.D. violation, effectively increasing the maximum penalty for export violations from $250,000 to $500,000.

One of the charged S.E.D. violations also involves an alleged failure by the company to state the correct ECCN on the S.E.D. It’s not entirely clear what ECCN was listed. If the incorrect ECCN charged was EAR99, then this will necessarily occur with every export violation. It also seems likely that the other nine S.E.Ds showed EAR99 as the ECCN, making it unclear as to why just one instance of this was singled out.

Also puzzling here was why BIS engaged in this piling on of charges where the ultimate penalty was $88,000 and didn’t require these charging gymnastics. Where the exporter has purposefully given a false description of the item exported in order to export it without a license, I can see some justification for adding an S.E.D. charge. But there is absolutely nothing in this case to suggest that the S.E.D.s called the exported items anything but what they were: control valves.

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

Mar

13

Does Anything Exported to the UAE Ever Stay There?


Posted by at 10:24 pm on March 13, 2012
Category: BISCriminal PenaltiesSyria

Afton, WyomingAn Afton, Wyoming man, Matt Kallgren, was sentenced, on January 23, 2012, to three years probation with the first four months in home confinement on charges that he exported EAR99 diesel truck parts to Syria. Of course, since criminal penalties weren’t enough in this case, the Bureau of Industry and Security (“BIS”) piled civil charges on top of the criminal prosecution. Now BIS has announced a settlement of the civil charges pursuant to which Kallgren agreed to a $75,000 penalty and a three-year denial order, both of which were suspended for three years provided that he commits no further export violations and complies with the terms of his criminal sentence.

According to the charging papers, Kallgren was contacted by a Syrian company in 2006 which was seeking to purchase civilian diesel engine parts. When Kallgren attempted to ship the parts, his “normal freight forwarder” (which according to this local newspaper account was UPS) told him that items couldn’t be shipped to Syria. He then used a freight forwarder recommended by the Syrian buyer to ship the parts to Syria by transshipping them through the UAE.

Miraculously Kallgren was subsequently the, er, beneficiary of an “Outreach” visit from Immigration and Customs Enforcement Agents who, allegedly, advised him on the U.S. laws prohibiting exports to embargoed destinations. (Another case which shows that the appropriate response to an “Outreach” visit is to call your lawyer.) Kallgren shipped a second order of parts via the UAE to Syria which, in a similarly miraculous fashion, were seized by Customs on their way out of the country. Allegedly, Kallgren doubled down and told Customs that the parts really were destined for the UAE. Really. I promise. Pay no attention to those commercial invoices.

Kallgren’s company Powerline Components, which shares Kallgren’s home address, also agreed to settle separate charges relating to these shipments. Under that settlement, Powerline agreed to a $60,000 fine and a three-year denial order. The denial order, but not the fine, was suspended.

Finally, in what appears to be a related case, R.I.M. Logistics agreed to a $50,000 fine to settle charges that it aided and abetted an export of EAR99 diesel parts to Syria via the UAE. Although that settlement does not mention Kallgren or Powerline, the timing and subject matter strongly suggests that these were the same exports that got Kallgren and Powerline in trouble. Interestingly, there is not a single allegation in the charging letter that it had any knowledge that the export to the UAE was ultimately destined to a customer in Syria. One might suspect that R.I.M. was the freight forwarder recommended by the Syrian customer, in which case R.I.M. might have had knowledge of the ultimate destination of the export. But without making that assumption, and based on the face of the charging documents, R.I.M. was held to be absolutely liable for its customer’s misdeeds whether or not it had any knowledge of them.

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