Archive for December, 2010


Dec

15

Proposed Category XII Reforms Leaked — But Not By WikiLeaks


Posted by at 11:10 pm on December 15, 2010
Category: DDTCExport Reform

laserWikiLeaks has gotten the State Department so flustered that it is leaking its own documents. Today DDTC posted a working document discussing proposed changes to Category XII of the United States Munitions List (“USML”). The document had emblazoned on each page “For DTAG Discussion only, not for release outside of the DTAG.” Fortunately, there was no discussion of voluptuous Ukrainian nurses traveling with a certain flamboyant dictator. Instead, the only things of even remotely prurient interest in the document are things that would only cause the most hard-core export geeks to break a sweat.

Category XII(b) currently controls:

Lasers specifically designed, modified or configured for military application including those used in military communication devices, target designators and range finders, target detection systems, and directed energy weapons.

The DTAG working document would substantially narrow this category. Naturally the “specifically designed, modified or configured for military application” language would go the way of VHS recorders and CRT televisions. Instead three specific classes of lasers would be called out and placed in Tier 2:

a. (ITAR T2) Lasers designed exclusively for directed energy weapons.

b. (ITAR T2) Lasers for target designators containing standard or encoded designator pulse formats

c. (ITAR T2) Lasers specifically designed for infrared countermeasures.

Under this formulation, military communications lasers and target detection systems would not be controlled by the USML and directed energy weapon lasers would only be covered if the laser was exclusively designed for directed energy weapons. And since these lasers would be in Tier 2, these lasers would be exempt from license requirements to countries that are allies and strategic partners.

Even more interesting is the language relating to the proposed new controls on Gen3 night vision:

5. (ITART2) Gen3 image intensification tubes with a FOM of XXXX or more.

6. (ITAR T3) Gen 3 image intensification tubes with a FOM of XXXX or less.

You can spend all day looking for “FOM” in the current controls for night vision set forth in the USML, so it’s interesting to see this concept, long a mainstay of provisos for night vision export licenses, take a step out of the closet and take a bow. “FOM” stands for Figure of Merit which is a performance-based measure calculated from the number of line pairs per millimeter multiplied by the signal-to-noise ratio of the image intensifier tube. Although the FOM number is left blank in the draft, it is likely to around 1600 FOM. This will eliminate most controls on night vision with an FOM under 1600 by placing it in Tier 3 where licenses will only be required for the most sensitive destinations

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Copyright © 2010 Clif Burns. All Rights Reserved.
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Dec

14

Export Reform: Boon for Engineers, Bane for Lawyers?


Posted by at 5:44 pm on December 14, 2010
Category: DDTCExport Reform

blackboardOne of the oft-stated goals of the White House’s export control reform initiative is to transform the United States Munitions List (“USML”) to a “positive” list like the Commerce Control List (“CCL”). Instead of squishy category descriptions like “any snark-qualified widget specifically designed, modified or configured for military application,” you would have a positive, easy-to-apply category description like “any snark-qualified widget, n.e.s., with a height-to-width ratio exceeding 16:9, a weight in excess of 2.4 kilograms, and made from teflon, gorilla tape, or travertine stone.”

Of course, the problem here is that the bright line description, in order not to be overly broad, may need to be so technical that the line is bright only to a highly skilled engineer trained in a particular technology and completely dark and unintelligible to everyone else. Exporters who have struggled with classification under the Commerce Control List are familiar with this phenomenon for high-performance computers, certain digital networking devices and the like.

Now enter the proposed revisions to USML Category VII released last week. In particular, let’s take a look at Category VII(c) which covers vehicle armor. Category VII(c)(7) under the proposed rule would cover “Composite armor with Em > 1.4 and meeting NIJ Level III or better.” Well, that’s a breath of fresh air, you think, something that will be easy to apply by exporters, young and old.

Not so fast there, bucko. You haven’t seen the definition of Em yet:

This is probably the time for me to remind you that there is no crying in export law.

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Dec

9

Software Engineer Caught in Export Sting


Posted by at 10:31 pm on December 9, 2010
Category: Arms ExportCriminal Penalties

satelliteA recently unsealed criminal complaint filed in federal district court in Seattle provides a wealth of details on the criminal export prosecution of Lian Yang, a software engineer living in Woodinville, Washington. According to the allegations of the complaint, Yang, who was caught in an undercover sting, attempted to illegally export ITAR-controlled satellite components to the PRC without the required export license.

Yang initially approached a confidential source and told him that he had “old school friends” in China who were making money importing electronic parts and that there was a financial opportunity in selling those parts to them. Yang indicated that some of the parts that his friends wanted might be export-controlled, but that he didn’t want to do anything illegal. Yang then provided a list of the items he was seeking which included an ITAR-controlled satellite component. Two days later the confidential source was in contact with the FBI.

At the behest of the FBI, the confidential source put on a wire and continued to work with Yang on Yang’s plan to acquire and export the satellite parts. Of course, a criminal conviction would require proof that Yang knew that it was illegal to export the items in question. According to the complaint, Yang requested that the parts be shipped under false invoices that concealed the actual parts in the shipment. Additionally, the complaint alleges that Yang was contemplating further concealing the nature of the parts by effacing the part numbers printed on them.

The undercover agents then became involved in the investigation as the supposed supplier of the parts. Yang wired the negotiated price into an account set up by the agents, who arrested Yang at the meeting at which they were to deliver the parts.

Oddly, at one point, the undercover agents told Yang that there would be delay in the delivery of the parts. The delay, they said, “is with the government,” further stating that the “compliance paperwork” was “waiting to be reviewed and signed.” This will certainly complicate the government’s proof that Yang had criminal intent and knew that the export of the items was illegal. It’s not clear what innocent reason the government had for suggesting that the transaction was being reviewed by the U.S. government.

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Dec

8

Commerce Proposes Broad New License Exception


Posted by at 11:48 pm on December 8, 2010
Category: CCLExport Reform

Export ReformIn tomorrow’s Federal Register, the Department of Commerce’s Bureau of Industry and Security will propose, as part of the export reform initiative, a new license exception called the Strategic Trade Authorization (STA). The new license exception will eliminate current license requirements for exports of a large number of items on the Commerce Control List to 162 destinations. The exact list of items eligible for this exception is not yet completely finalized because BIS has not yet designated “Tier 1” items, i.e., the most sensitive items on the CCL, all of which will not be eligible for this new exception.

Countries not eligible for exports under License Exception STA include, not surprisingly, all the countries subject to complete or partial arms embargos, as listed here and including, for example, China, Venezuela, Haiti, Vietnam, Lebanon and Belarus. Ineligible countries also include countries not subject to any arms embargo, including the U.A.E., Malaysia, Qatar, Angola and Pakistan.

Exporters using License Exception STA will be required to comply with other conditions as a prerequisite to the availability of the exception, most notably a requirement that the exporter report exports using the exception to BIS under the provisions of § 743.1 of the Export Administration Regulations. Additionally, a special Destination Control Statement will be required for exports under License Exception STA.

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Dec

7

Satellite Fuse Maker Sues DDTC


Posted by at 10:17 pm on December 7, 2010
Category: Arms ExportDDTC

satelliteCalifornia-based AEM, an electronics manufacturer which produces, among other things, hi-rel fuses used in military and commercial satellites filed a complaint in federal district court on November 12 alleging that a determination by the Directorate of Defense Controls (“DDTC”) that AEM would be subject to a policy of denial on all export licenses violated AEM’s due process rights. The suit alleges that DDTC issue a letter to AEM stating the policy of denial and argues that this letter constituted an effective debarment of AEM and required, under both the agency’s own rules and the Due Process Clause, notice and an opportunity for hearing, neither of which were accorded.

According to the lawsuit, AEM filed in 2000, in the wake of the legitimate confusion caused by the Strom Thurmond National Defense Authorization Act of 1999, a commodity jurisdiction request with DDTC seeking to have its hi-rel fuses classified as EAR99 as they had been under a classification issued by the Department of Commerce in 1997. The STNDAA re-transferred from Commerce to DDTC jurisdiction over commercial satellites and “related items” to the exclusive jurisdiction of DDTC. Needless to say, the meaning of “related items” was far from clear even given the statute’s attempt to define that term.

Over a year after filing the CJ request and prior to any action on that request by DDTC, AEM filed a license application with DDTC requesting authority to export its hi-rel fuses to China, an application which DDTC denied based on the arms embargo in place against China. For reasons that are not entirely clear, the complaint says that “AEM interpreted this denial as applying only to exports to the PRC.” It then exported fuses subject to the CJ request without licenses to destinations other than China.

Understandably, DDTC was not amused. First, it’s hard to explain AEM’s flip-flop between feeling a license request was necessary for these products and then deciding that they were not. DDTC’s refusal to permit an export to China was hardly a determination that the fuses could be exported freely to all other destinations. Second, and more significantly, DDTC’s guidance on CJ requests makes clear that licenses are required for items while the CJ requests are pending. No exception is permitted because the exporter feels that the CJ request has been pending for too long a period.

That being said, DDTC’s pique with AEM isn’t sufficient justification for the agency to ignore the Due Process clause or its own rules. Part 128 of the International Traffic in Arms Regulations provides for notice and hearing as a prerequisite to administrative debarment. The policy of denial differs from debarment only by virtue of the fact that domestic purchasers of AEM products could export them, whereas if AEM were debarred those purchasers would require a transaction exception from DDTC to export the fuses. That doesn’t seem a significant enough difference to justify imposing a policy of denial without notice or hearing.

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Copyright © 2010 Clif Burns. All Rights Reserved.
(No republication, syndication or use permitted without my consent.)