Yesterday a new indictment for conspiracy to export controlled technical data was issued against a family that had been previously indicted for failing to register as agents of the Chinese government. At the center of the case is naturalized U.S. citizen Chi Mak who worked for a defense contractor in California. Mak allegedly took files from his employer about, among other things, naval ship design. He then encrypted them, hid them as music files on a CD, and passed the CD to his brother Tai for delivery to the Chinese government. The CD never made it to China, but was found in Tai’s luggage at LAX as he prepared to depart for China.

Mak’s problem, however, is not only the indictment. He has also hired a lawyer who doesn’t appear to have a clue about export law, at least judging from this statement:

[The] attorney for Chi Mak . . . said he hadn’t seen the indictment. He said his client worked with sensitive information as part of his job, but never misused it or stole intelligence.

“My client is involved in an area of technology that is not classified — is not even prohibited from distribution,” [Mak’s attorney] said. “It’s a strong sign that they are desperately trying to find whatever counts can stick. They’ve overcharged this case consistently.”

As any export lawyer or export compliance officer knows, technical data on USML items need not relate to classified or restricted technology in order to require a license for export. It only needs to be company-proprietary technical information about a USML-listed defense article.

The U.S. Attorney’s Office for the District of Columbia announced this week the indictment of three California men for the attempted export of textile machinery to Iran in violation of the Iranian Transaction Regulations. Two of the men — Babak Maleki and Shahram Setudeh Nejad — were arrested; the third man — Mojtada Maleki-Gomi — is currently at large in Iran.

According to the indictment, the three men had placed an advertisement on a web site to sell “knit de knit” textile equipment. KDK equipment is used to dye multicolor yarns for fabrics and carpets. An undercover ICE agent and a “cooperating source” contacted Nejad and asked if the equipment could be shipped to Iran. Nejad then put the undercover agent and the source in contact with Mr. Maleki-Gomi who explained that the equipment could be transhipped through Dubai to Iran in order to avoid the U.S. sanctions on transactions with Iran. A container of 30 knit de knit machines was shipped and then intercepted by the U.S. government in Dubai.

Exporters should note with caution that this was a sting operation where the government agents proposed the illegal export. It is easy to see why the three defendants here might have been targeted. All three men had what appeared to be Iranian surnames and were selling textile equipment. Iran is, not surprisingly, a substantial importer of textile equipment for its carpet and fabric industry and the agents surmised that the men might, therefore, be willing to ship the equipment to Iran.

We have also seen a tendency for ICE agents, as they did in this case, to target web-based sellers for sting operations. This is probably because it allows them to do investigative work from the comfort of their offices.

False labelling of exported goods can land exporters in a world of trouble and sometimes in places they don’t expect. We previously posted on a shrimp exporter prosecuted in the United States for misrepresentations made to Mexican authorities. Today we have a new development in the case of a Vietnamese exporter indicted in Florida for mislabeling exports from Vietnam to the United States.

At issue were exports of catfish from Vietnam to the United States. Because catfish from Vietnam is subject to anti-dumping duties in the United States, the exporter in question labelled the catfish as grouper to avoid the dumping duties. In May 2006, the U.S. Attorney for the Northern District of Florida obtained a criminal indictment against both domestic importers and foreign exporters of the mislabelled catfish. An Giang Agricultural and Food Import Export Company (“AFIEX”) and Mr. Buu Huy, its Deputy Director, were included among the indicted Vietnamese exporters.

Several days after the indictment Mr. Huy traveled to Brussels to attend the European Aquatic Product Fair and was promptly arrested by Belgian officials at the request of the U.S. Attorney who had obtained the indictment. The Belgians held Mr. Huy in custody while U.S. officials sought to extradite Mr. Huy to Florida. Mr. Huy spent 133 days in custody in Belgium before Belgian officials refused, on September 20, to allow the extradition. On Monday, Mr. Huy finally returned to Hanoi. It is perhaps safe to assume that if he had plans to visit Disneyland, they have been indefinitely postponed.

The Vietnamese Association of Seafood Exporters and Processors (“VASEP”) had intervened with the Belgian government to secure Mr. Huy’s release. One of the arguments that they presented to the Belgian officials is that the Vietnamese exporters were not liable to pay the U.S. duties that were being evaded and that liability should rest solely with the U.S. importers who were obliged to pay the evaded duties. Although this explains why an exporter might believe that its actions shouldn’t lead to penalties for it in the importing country, it neglects that the conspiracy to help the importer evade duties is equally criminal. Furthermore, the fact that Mr. Huy was involved in exporting goods to the United States arguably gave the U.S. courts criminal jurisdiction.

I could find no record as to why the Belgian government finally released Mr. Huy. In addition to the argument that VASEP made to the government, Mr. Huy’s lawyer also argued that AFIEX stopped exporting to the United States prior to the imposition of the anti-dumping duties and that the shipments had the correct Latin name for the fish. The important point here, however, is that exporters should understand that unlawful exports can result in liability in both their home country and in the country to which the goods are shipped.

Today is Friday, and we have shrimp on the menu.

Last Monday Pacific Shrimp Company pleaded guilty to various charges arising from its exports of shrimp to Mexico. The company pleaded guilty to two counts of falsifying a government document, which is a violation of 18 U.S.C. § 1001(a)(3). In order to obtain NAFTA’s tariff-free treatment from Mexico, the company falsely certified that the shrimp originated from the United States even though it had been purchased from India and was being re-exported to Mexico. Specifically, the company admitted that it falsified the Department of Commerce’s NAFTA Certificate of Origin. (In addition to the Certificate of Origin, the company also admitted that it falsified health and inspection certificates related to the exports.)

What is significant here for exporters is that even though Mexico was injured by the exporter’s actions, the exporter was still prosecuted in the United States. Further, the U.S. prosecution would not curtail any remedies that Mexico might have against the exporter for violation of Mexican law.

Pacific Shrimp also pleaded guilty to two counts of unlawful exports of wildlife in violation of 16 U.S.C. § 3372(a)(2)(A), which prohibits exports of fish, shellfish or wildlife in violation of any state or foreign law. Presumably this statute was violated because the export of the shrimp to Mexico with a false certificate of origin violated Mexican law.

The Company, as part of a plea deal, agreed to a fine of $120,000 and five years probation.