The indictment in the case of MIchael Zhang, the Chinese American arrested last week for exporting electronic circuits to China has been released. It provides some additional information on the government’s case, but leaves just as many questions unanswered.

According to the indictment, in 2006, Zhang exported on four separate occasions, 602 MIC bus controllers manufactured by Vetronix Research to the PRC. Additionally, on one occasion in 2008, Zhang exported 5 SRAM chips manufactured by Cypress Semiconductors to the PRC.

Of course, in order for this to be a criminal offense, Zhang needed to know that these were export-controlled items, and the indictment provides little information as to the reason that these items were export-controlled or why Zhang was in fact aware that they were export controlled. And, as many export professionals will attest, determining whether electronic circuits such as these are export-controlled is a difficult task at best.

The Vetronix product involved, the MIC bus controller MIC-320GM is no longer listed on the Vetronix website, although the Google cache suggests that as late as October 2008, it was still listed. So I can’t determine whether the now-vanished listing provided sufficient information to determine whether the item was export-controlled or not.

The MIC bus is a protocol that apparently allows solving power/data distribution and management problems under inclement environmental conditions. That would at least make me suspicious that the item might be controlled, but that knowledge alone wouldn’t be enough to support an indictment.

In terms of enforcement policy, one also has to wonder why exports of this product led to a criminal prosecution rather than a civil penalty proceeding. A quick Google search on the part number reveals thousands of these same parts available for sale by Hong Kong parts distributors.

The SRAM chip exported by Zhang was Cypress’s STK14C88-5L45M. No datasheet or specifications for this product are available on the Cypress website, so there is no way to determine whether the item meets the specifications set forth in ECCN 3A001 which is probably the controlling ECCN. Of course, it’s possible that this information was on product-packaging or that the company had otherwise advised Zhang that the items were controlled, but it is not information that is readily-available.

Problems like this obviously have motivated BIS to announce today a project that might make more information available as to the export classification of various items. Under the new project BIS is soliciting manufacturers to provide voluntarily links to classification information on their products. BIS will then make those links available on a BIS web page. Whether or not enough manufacturers will participate to make this a useful resource remains to be seen.

ABOVE:Leo Crowley
Alien Property Custodian

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Prisoner lawsuits generally run the gamut from complaints about lumpy mashed potatoes at dinner to allegations of illegal punishments performed by prison staff. So, it’s a bit unusual to see a prisoner complaint based on the Trading With the Enemy Act, 50 App. U.S.C. § 1 et seq. The TWEA, as many readers will know, is the act that serves as the basis for sanctions imposed by the United States on Cuba and North Korea.

The United States District Court for the District of Columbia recently had the occasion to dismiss just such a case, although the dismissal order provides only a hint at the creative prisoner jurisprudence involved:

Plaintiff, a prisoner at the United States Penitentiary Lee in Jonesville, Virginia, sues the United States under the Trading with the Enemy Act … for “the return of any and all negotiable instruments forwarded to agents of the United States of America and transferred to the Alien Property Custodian and/or deposited in the Treasury of the United States of America.”

Astute history buffs will no doubt know that the office of the Alien Property Custodian was eliminated in 1966 by President Johnson’s Executive Order 11281, so the prisoner’s claims relate to events from over 40 years ago by a now abolished federal office. It is indeed hard to imagine what individual claim he might have had arising under actions by the Alien Property Custodian that long ago. The district court simply called the claim “delusional” and dismissed it.

Still, I have to admit some curiosity over the imaginative process that led the plaintiff prisoner to spin a claim under the TWEA. Section 9 of the TWEA of claims by non-enemies who can demonstrate an interest in property seized under the act. In what seized property could the prisoner possibly have claimed an interest? The Bayer trademark? The Hamburg-American Line Building in Manhattan?

ABOVE: Marina Hemingway, Cuba

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Back in November 2008, Export Law Blog reported on the Federal Government’s indefatigable campaign to bring to justice Michele Geslin and Peter Goldsmith who had organized a sailboat regatta between Key West and Cuba. The story wondered why the organizers were hunted down and fined by the Bureau of Industry and Security (“BIS”) while the skippers of the boats were allowed to sail off into the sunset without repercussions.

Well, it appears that at least one skipper, Wayne LaFleur, did feel the bitter lash of BIS. Two weeks ago, BIS issued a Final Decision and Order fining LaFleur $8,000 for his export of his sailboat to Cuba in connection with the regatta. The order does admit that none of the other skippers were penalized and provides no explanation for the agency’s decision to go only after LaFleur.

The order also doesn’t clearly detail what defenses, if any, LaFleur had to the BIS charges other than LaFleur’s claim that he had received permission from the Coast Guard to travel to Cuba. BIS’s response to this defense was as unhelpful as it was Kafkaesque: it’s not BIS’s fault if the Coast Guard doesn’t coordinate with us and gives you permission to do something illegal.

Significantly the Coast Guard Administrative Law Judge (“ALJ”) who heard the BIS case and issued a Recommended Decision and Order made absolutely no mention of LaFleur’s defense that the Coast Guard gave LaFleur permission to sail into Cuban waters. No doubt admitting the Coast Guard’s mistake would have put the ALJ in an uncomfortable position.

At the time of the regatta, the Coast Guard had established a “security zone” consisting of the U.S.-territorial waters off the coast of Florida. For a vessel the size of LaFleur’s, departure from the “security zone” and entry into Cuban waters merely required the the approval of the Captain of the Port, i.e., the commanding official of the Coast Guard for the sector involved. Not until after the regatta, which took place in May 2003, did the Coast Guard’s rules require that such permission could only be given by the Coast Guard if the requesting vessel had a license from BIS to export the vessel to Cuba. The final rule establishing the BIS license requirement was adopted by the Coast Guard on July 8, 2004, more than a year after the regatta took place.

Perhaps the Coast Guard, which improperly authorized the trip to Cuba without all proper governmental authorizations, should be held accountable for aiding and abetting the export, just as were the organizers of the regatta. But the Coast Guard ALJ, who must have been aware of all this background, obviously had no desire to go there.

On January 10, FBI agents arrested William Chi-Wai Tsu, a U.S. citizen and resident of California. Tsu, who was born in Shanghai, was detained on charges that he had illegally exported electronic components to China without first obtaining required licenses from the Bureau of Industry and Security (“BIS”). An extraordinarily detailed affidavit by BIS Special Agent Willie Lo filed with the U.S. District Court provides an interesting narrative of how Mr. Tsu’s allegedly illegal exports were uncovered.

According to the affidavit, Mr. Tsu made numerous purchases of electronic components from RFMW, Ltd., a San Jose distributor. These components included a Trinquint TGA4036 amplifier circuit controlled under ECCN 3A001.b.2.d.

Employees of RFMW had advised Tsu that the components he was purchasing required export licenses. They received assurances from Tsu that he was not exporting the items but was instead using them in a manufacturing operation he owned in New Hampshire. When Tsu returned integrated circuits in October 2008 for “quality control” issues, RFMW became suspicious that the items had been exported.

First, the circuits seem to have been “primitively” handled, something which would not have happened in an assembly house in the United States. Such facilities typically have clean rooms for the handling of circuits. Second, the delay in returning the items also suggested that they left the United States.

When RFMW requested permission to visit Tsu’s facility in New Hampshire where he was using the circuits, Tsu declined saying that the facility was being “remodeled” and was not accepting visitors. The rest, as they say, is history.

If these allegations are true, this case is the only one I know where, seemingly, the defendant smuggles goods from the United States and then tries to return them for a refund. That doesn’t seem that much different from a thief returning the stolen loot to the victim and demanding better stuff.