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Archive for February, 2012

Feb

13

U.S. Threatens Thales Alenia Space over “ITAR-Free” Satellite

Posted by Clif Burns at 7:27 pm on February 13, 2012

Category: China • DDTC

China W3C Launch Reuters has obtained a copy of a State Department letter to Congressional staff on the simmering feud between the State Department and Thales Alenia Space over the W3C satellite that Thales sold to the Chinese and which the Chinese have launched. Thales has claimed, but the State Department refuses to believe, that the W3C satellite was “ITAR-free” and could be shipped to China without violating the U.S. embargo on exports to China of satellites and other space vehicles.

The State Department’s efforts to investigate whether U.S. components or technology were incorporated into the W3C satellite, in contravention of the claim that it is “ITAR free,” have been stymied by Thales’s invocation of a French blocking statute which forbids French companies from supplying documents or information to be used in foreign governmental investigations. According to the Reuters report, the State Department letter to Congress acknowledged that the blocking statute would make Thales unable to comply with its investigative requests but nevertheless suggested that the result might be a blanket ban on exports by U.S. companies to Thales.

Needless to say such an action barring exports to Thales would deal a heavy blow to Thales and to the bottom lines and jobs at U.S. suppliers to Thales. Such a ban could force Thales to revamp many of its product lines and would certainly strain French-American relations, not to mention the possibility that the Congressional cafeterias would revert to serving freedom fries and freedom vanilla ice cream again. Worse yet, ordinary Americans might have to start referring to some of their dogs as freedom poodles and certain hairstyles as freedom twists.

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Feb

8

The Third Deadly Sin

Posted by Clif Burns at 11:45 pm on February 8, 2012

Space Circuitry A California man has been indicted in connection with his attempt to export radiation hardened, space qualified chips to the People’s Republic of China without an export license. The indictment, if true, tells an interesting tale.

According to the indictment, which was unsealed on Monday, the defendant Philip Chaohui He owned and operated a company called Sierra Electronic Instruments, of which he was the only employee. Estimated sales revenues for 2010 were $110,000. I was unable to locate any website for the company, and the company’s web footprint consisted of two sparse directory entries.

Even so, He and Sierra got their hands on $549,654 worth of radiation hardened, space qualified memory chips from Aeroflex, a Colorado Springs chip designer and manufacturer. Seven months later, He drove his car to the Port of Long Beach and to a PRC-flagged ship there which had recently arrived from Shanghai and was scheduled to return in a week. The chips in question were in the defendant’s trunk concealed “in several plastic infant formula containers placed inside five boxes which were sealed and labeled as â€œmilk powderâ€ written in Chinese.

The indictment doesn’t describe what happened next, but it’s pretty clear. The federal agent that had been tailing Mr. He informed his buddies who swooped down on Mr. He, waving guns and shouting typical law enforcement stuff at him before dragging him away in handcuffs. The indictment suggests that before the dockside bust, the feds had snooped into his bank account and phone records and identified numerous phone calls to the PRC and, more ominously, two wires from the PRC to Mr. He totaling just under $500,000. As a result, Mr. He’s careful concealment of the goods in baby formula was a waste of time.

It doesn’t take a rocket scientist to guess what happened here. Obviously, Aeroflex smelled a rat when this one-man storefront operation wanted to lay his hands on a half-million dollars worth of highly specialized space-qualified circuitry, so they alerted the authorities. All the while Mr. He was agonizing over whether it was safest to hide the goods in baby formula, cans of dog food or boxes of knitting needles, he was already a marked man. Had he gone in for a smaller amount (for which he certainly would have been paid less) he might be basking in the Southern California sun. Indeed, he reminds me of the would-be bicycle thief who tried to walk out of my condo building’s parking garage with two bicycles rather than racing off swiftly on one bicycle.

He went down too.

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Feb

6

White House Blocks Government of Iran and All Iranian Banks

Posted by Clif Burns at 9:20 pm on February 6, 2012

Category: Iran Sanctions • OFAC

Ayatollah Khamenei The White House issued an executive order today blocking all property of the Iranian government and all Iranian financial institutions. Prior to this action, the Iranian Transaction Regulations (“ITR”) required U.S. persons to reject transactions with these parties rather than to block them.

Simultaneously with the executive order, the Office of Foreign Assets Control issued two new general licenses — cleverly named General License A and General License B — that would nevertheless permit certain transactions involving the newly blocked parties. It also updated the FAQs on the OFAC website to provide further explanations of the effect of the executive order and the two new general licenses.

The first fear that you might have is that the blocking of the Government of Iran and all Iranian financial institutions might effectively end certain transactions authorized under the ITR, say, for example, the payment of fees in connection with the registration of trademarks in Iran permitted under section 560.509 of the ITR. General License A was issued to take care of that. It permits activities already authorized under specific licenses or general licenses issued under the ITR. “General license” in this context doesn’t just refer to documents titled “General License” like this General License A but also refers to activities specifically authorized by the regulations itself, like the previously mentioned authorization of certain activities relating to trademarks in Iran. General License A specifically excludes from its scope transactions relating to closing or liquidating Iranian accounts otherwise authorized by section 560.517.

General B permits non-commercial personal remittances as long as they are not made through Iranian banks or other entities that were previously blocked, such as Bank Saderat or Bank Melli, not including the Iranian financial institutions that were blocked by this latest executive order.

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Feb

2

Russkies No Longer Bullish on Dual Use . . . Cows

Posted by Clif Burns at 8:17 pm on February 2, 2012

Category: BIS • General

Virginia P. Holstein Well, who would have thought that a Google news search on “dual use exports” would turn up a WaPo story on the export of bulls from Virginia to Russia? Or that the story would talk about “dual use cows”? I certainly did not, which is what mooo-ved me to write this post.

According to the story, twenty-nine Holstein bulls have already been exported to Russia and another thirty are to follow. The bulls are set to, er, revitalize (at least that’s what the kids call it now) Russian Holstein dairy herds. The need for bulls with that certain American panache was explained as follows in the story:

Russian farmers want American bulls to improve dairy-herd genetics in a land hampered first by collective farming, then by the collapse of the Soviet Union. …

Instead of raising dairy cattle for milk and beef cattle for meat, Soviet collective farms had â€œdual-useâ€ cattle, which would be milked for a while, then killed for meat, Osipenko said. Those one-size-fits-all cattle may have embodied an egalitarian ideal, but both milk and meat were mediocre, said Osipenko, a native of Ukraine who recalled his mother boiling beef for hours in a fruitless attempt to tenderize it.

After the Soviet Union collapsed, many dairy herds were all but wiped out as hungry Russians consumed them for food.

â€œThere was a terrible crisis, apparently, and they pretty much ate their seed stock,â€ said Patrick Comyn, a large-animal veterinarian with the private Virginia Herd Health Management Services who worked on the deal.

And that’s where the exported bulls come in. I am sure that the Virginia bulls will be delighted, to the extent that bulls can be delighted in the first place, that they are fulfilling both a carnal and a patriotic duty.

Of course, these mail-order American husbands may never have seen their wealthy Russian wives if they had been horses because, as all export geeks know, export of horses by sea (ECCN 0A980) requires a license from the Department of Commerce. Personally, I think this is another example of wanton discrimination against American cows in favor of American horses which are spared from both the dinner table and long ocean voyages.

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