“Warning, Warning!!”

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The Electronic Freedom of Information Act Reading Room on the website of the Bureau of Industry and Security (“BIS”) has been recently updated and now includes anti-boycott warning letters for 2008. I’m not certain when the 2008 warning letters appeared on the BIS website, but I’m pretty certain it was after our recent post on BIS’s confusing position regarding the reportability of requests that can be satisfied by a certification by an agent of a shipping company. BIS takes the position that a request for certification that a ship is eligible to enter into certain ports becomes reportable under the anti-boycott regulations if the request allows the certification to be provided by an agent for the shipping company.

Three warning letters for 2008 are now posted in the EFOIA reading room, and two of them involve agent certifications. One states that the following language is reportable:

CERTIFICATE ISSUED BY THE CARRIER/MASTER OR THEIR AGENT CERTIFYING THAT THE CARRYING VESSEL/AIRLINE IS ALLOWED BY ARAB AUTHORITIES TO CALL AT ARABIAN PORTS/AIRPORTS AND IS NOT SCHEDULED TO CALL AT ANY ISRAELI PORT/AIRPORT DURING ITS VOYAGE TO THE UNITED ARAB EMIRATES.

The other singles out this language as reportable:

A certificate from the ship-owner, master or agent of vessel … stating the following: The vessel is eligible to enter into the ports of UAE in conformity with its law and regulations.

Neither of these letters provides any detail as to why these contractual requests are reportable under the anti-boycott regulations, stating only

All U.S. persons are required to comply with the Regulations.

Call me old-fashioned, but it seems to me that a “warning” letter ought to actually provide a warning and explain why the conduct at issue is a violation. Otherwise, just what is the agency “warning” anyone about? Reporting contractual provisions completely identical to the language in the warning letter? That’s not very helpful.

And, frankly, I’m baffled as to why these letters are so cagey in this regard. It certainly wouldn’t be that hard for BIS to say that the language of section 760.5(a)(5)(viii) exempts from the reporting requirements requests from the “owner, master, charterer, or any employee” of a ship as to eligibility to enter specific ports but not requests that permit such a certificate not only from those parties but also from agents of those parties.

When Jesus Argandona, arriving in San Antonio from Mexico City, stepped off his plane, he probably thought his next destination would be his hotel. Instead it was jail. A criminal complaint had been filed against him under the Anti-Smuggling statute, 18 U.S.C. § 555*, in connection with his export of blank CDs from Laredo, Texas to Mexico City. If you think there’s something confusing about the U.S. charging a Mexican for smuggling goods into his own country, then you only know the half of it.

The criminal complaint filed against Argandona is hardly a model of narrative clarity, but the basic outlines of what happened seem to be this. Argandona purchased five containers of blank CDs for $600,000 from a Panamanian company which the Panamanian company had purchased from China. The containers, which were in the Laredo Free Trade Zone at the time of the sale, were being shipped “in bond,” i.e., they had entered the United States without assessment of duties because they were in transit to another country, in this case presumably Panama. Argandona allegedly instructed a warehouse employee outside the FTZ to use the services of a custom broker that Argandona believed could bribe a CPB official to cancel the in-bond documents.

The warehouse employee was then to take the containers to his warehouse outside the FTZ and subsequently to export them to Mexico. Instead, Customs officials later discovered that the document used to release the containers from the FTZ had been forged by the Customs broker, so they seized the containers at the warehouse to which they had been moved. The warehouse employee admitted to the Customs agents that he had assisted in other shipments for Argandona of blank CDs to Mexico, and that he was paid $40,000 per trailer, most of which was used to pay bribes to Mexican law enforcement officials.

The criminal complaint against Argandona alleges that this conduct violated 18 U.S.C. § 555. That section provides as follows:

Whoever fraudulently or knowingly exports or sends from the United States, or attempts to export or send from the United States, any merchandise, article, or object contrary to any law or regulation of the United States, or receives, conceals, buys, sells, or in any manner facilitates the transportation, concealment, or sale of such merchandise, article or object, prior to exportation, knowing the same to be intended for exportation contrary to any law or regulation of the United States, shall be fined under this title, imprisoned not more than 10 years, or both.

An essential element of this statute is that the export is contrary to a law or regulation of the United States. Neither the criminal complaint nor the U.S. attorney’s press release on this case specify what law this export violated, instead citing only 18 U.S.C. § 555. And it’s not clear what laws the export violated. There may have been U.S. laws violated before the export as a result of the fraudulent in-bond release documents but the export itself did not violate any U.S. laws. If the government’s claim is that any law violation that occurs in the course of the export transforms the export into a violation of 18 U.S.C. § 555, then that law would also be violated if the truck carrying the export to the border ran a stop sign or exceeded the speed limit.

Another conundrum posed by this case is why Argandona sought to cancel the in-bond documents even though he was planning to export the blank CDs to Mexiso and not to illegally divert them for sale or use in the United States. My speculation, and it’s only that, is that Argandona wanted to avoid the extra scrutiny involved in an in-bond export. Music piracy is a substantial problem in Mexico and there have been a number of seizures of blank CD media by Mexican authorities under Mexican law when they suspect that the blank CDs are destined for illegal piracy operations. It’s probably reasonable to suspect that these five containers of blank CDs were more likely destined to be used by large-scale piracy operations and not, say, for retail distribution.

However, even though it might have been illegal under Mexican law to import these CDs, the export must violate U.S. law for charges to be appropriate under 18 U.S.C. § 555.

[Hat tip to Guy Feral who first noticed this case.]

*The criminal complaint mistakenly cites 18 U.S.C. § 554 and not 18 U.S.C. § 55f. The anti-smuggling provision was original enacted, the USA Patriot Improvement and Reauthorization Act of 2005, as 18 U.S.C. § 554, even though there was already a § 554. It was later officially recodified as § 555.

An interesting and informative article in the online edition of Die Welt takes the U.S. export control scheme to task for restrictions imposed on the export of avian bird flu vaccine.

When Indonesia’s health minister stopped sending bird flu viruses to a research laboratory in the U.S. for fear Washington could use them to make biological weapons, Defense Secretary Robert Gates laughed and called it “the nuttiest thing” he’d ever heard.
Bird flu has killed more than 240 people across the world since 2003, nearly half of them in Indonesia.

Bird flu has killed more than 240 people across the world since 2003, nearly half of them in Indonesia.
Yet deep inside an 87-page supplement to United States export regulations is a single sentence that bars U.S. exports of vaccines for avian bird flu and dozens of other viruses to five countries designated “state sponsors of terrorism.“

The reason: Fear that they will be used for biological warfare.

The article doesn’t identify that single sentence, but, of course, that’s what this blog is for: to supply such technical details. ECCN 1C352.a.2 controls avian influenza viruses that have an intravenous pathogenicity index in six-week old chickens greater than 1.2 or which cause at least 75% mortality in 4- to 8-week old chickens infected intravenously. Although a note to ECCN 1C352 excludes vaccines, it refers to ECCN 1C991, which covers vaccines against the pathogens identified in ECCN 1C352, and hence at least some vaccines against avian influenza. ECCN 1C991, like other ECCNs in the xx99x series, is subject to anti-terrorism (AT) controls and thus items covered by that ECCN require export licenses to Cuba, Iran, North Korea, Syria and Sudan.

The article interviewed several experts who cast doubt on the notion that bird flu vaccine can be turned into a terrorist weapon:

The danger of biological warfare use depends on the specific virus or bacteria. But most experts agree that bird flu vaccines cannot be genetically altered to create weapons because they contain an inactivated virus that cannot be resuscitated.

Worse, the export controls appear to be counterproductive and run the risk that a virus that might have been controlled early in poultry populations instead mutates into a deadly human form which spreads to the United States:

[Export controls] could make it harder to contain an outbreak of bird flu among chickens in, say, North Korea, which is in the region hardest hit by the virus. Sudan and Iran already have recorded cases of the virus in poultry and Syria is surrounded by affected countries. Cuba, like all nations, is vulnerable because the disease is delivered by migratory birds.

Kumanan Wilson, whose research at the University of Toronto focuses on policymaking in areas of health protection, said it would be ironic if the bird flu virus morphed into a more dangerous form in one of those countries.

“That would pose a much graver threat to the public than the theoretical risk that the vaccine could be used for biological warfare,” he said.

U.S. Commerce Assistant Secretary Christopher Wall was interviewed for the story. He declined to elaborate on the precise threat posed by these vaccines, other than to say that the U.S. had “valid security concerns” with respect to the vaccines.

The Bureau of Industry and Security (“BIS””) issued an order today denying the appeal of U.K.-based Galaxy Aviation Trade Company Ltd of a Temporary Denial Order (“TDO”) without mentioning or responding to the grounds asserted by Galaxy for its appeal, although I suppose it’s possible that the Galaxy appeal was a procedurally inappropriate notice of appeal which asserted no specific grounds in support of the appeal.

Even so, the case in support of the TDO against, as set forth in the Administrative Law Judge’s Recommended Decision and Order upon which BIS relies, is several pebbles short of being rock solid. According to that decision, BIS presented evidence of contract of sale for the aircraft between Ankair and one Sam David Mahjoobi. Corporate records for Galaxy listed Mahjoobi as an officer of Galaxy. Additionally, one of Galaxy’s three shareholders has an address in the same building as Iran Air’s headquarters in Tehran. Another of the three shareholders had an office address in Tehran. Finally, the CEO of Act Air, which once owned the airplane, told a third party, who subsequently spoke to BIS, that the airplane in question was to be sold to Galaxy. The only direct evidence of Galaxy’s involvement is hearsay evidence from someone not necessarily even in a position to know that the sale was to Galaxy. The remaining evidence is suggestive but far from conclusive.

Two interesting things, however, emerge from the ALJ’s decision. First, BIS was using an Iranian “plane spotting” website to track the 747 in question and to confirm its delivery in Iran. (“Plane spotting” sites are sites where individuals can upload photographs of airplanes they have taken at various airports, usually with the tail identification number of the aircraft visible in the photograph). Second, BIS believes that there are two more 747s on their way to Iran Air.

Whaddya wanna bet that the Iranian plane spotting website, er, disappears?

Maxim Integrated Products, a publicly-traded designer and manufacturer of semiconductor circuits and other analog and digital electronics, agreed on October 3 to pay the Bureau of Industry and Security (“BIS”) a civil penalty of $192,000 to settle 34 counts of alleged export violations charged by the agency. Of particular interest is the count relating to a release of controlled technology to an Iranian national in the United States. (Such releases are called, in Export Geek Speak, “deemed exports.”)

The deemed export in question, and the resulting charges, should serve as a reminder to companies not to forget about the broad swath of technology covered under Export Control Classification Numbers (ECCNs) in the E99 series, that is, ECCNs in the form xE99x, such as 5E992. It was exactly that ECCN that was involved in the Maxim settlement and it covers any “technology relating to any telecommunications equipment and other information security and containing encryption.” Unlike other ECCNs in this category, ECCN 5E992 is not dependent upon the strength of the encryption, the algorithm used, whether it’s asymmetrical or not, or the use of the encryption. It covers all technology for encryption for telecommunications or information security, with the only exceptions being the public domain and fundamental research exceptions found in section 734.3 of the Export Administration Regulations (“EAR”).

Because the scope of the technology controlled under ECCN 5E992 and under other E99 series ECCNS is quite broad, the controls imposed under those ECCNs only limit exports to those few countries subject to Anti-Terrorism (“AT”) controls, i.e., Cuba, North Korea, Iran, Sudan and Syria. So Myriad could have shared whatever they shared with their Iranian employees with foreign employees from most other countries. My suspicion is that many companies don’t focus on series E99 controls with respect to their deemed exports, but, as this case shows, they should.

One other point: under section 734.2(b)(2)(ii) of the EAR, the deemed export rules do not apply to foreign nationals who have been granted permanent residence or protected status. My guess is that the Iranian involved here was in the country on a family-related visa, which would allow a work authorization, but not the receipt of any controlled technology.