ExportLawBlog

May

17

Traveling to the United States Can Be Dangerous

Posted by Clif Burns at 6:15 pm on May 17, 2012

ABOVE: Ulrich Davis Mugshot

On May 15, Ulrich Davis, a citizen and resident of the Netherlands, was sentenced to six months in prison and a $2,000 fine. He was charged with violating a Temporary Denial Order issued by the Bureau of Industry and Security (“BIS”).

The TDO in question was issued on October 1, 2007, against Aviation Services International, B.V., in the Netherlands, as well as affiliated and related individuals and entities in the Netherlands. Cyprus, and the UAE, and arose out of allegations that the parties subject to the TDO had shipped U.S. origin items to Iran. According to the Criminal Information, which served as the basis for Davis’s plea, Davis provided freight forwarding services involved in the export of acrylic adhesives and spray-paint coatings” from a company in the United States to an unspecified company listed on the TDO. All actions charged in the Criminal Information were undertaken by Davis entirely within the Netherlands and outside the United States.

The reason that Davis wound up being hauled in front of a U.S. federal district court and charged with violating U.S. criminal laws is that he traveled to the United States and was arrested at Newark Liberty Airport on his way back to the Netherlands from the United States. The U.S. takes the position that it has criminal jurisdiction over all persons, regardless of location and citizenship, for crimes arising out of their dealings with U.S. origin goods. This is not a position recognized by many other foreign countries, meaning that it would be unlikely that Davis could have been extradited from the Netherlands based on the actions alleged in this case, which all took place in the Netherlands and which did not violate Dutch law. But once he was in the United States — and voluntarily at that — whether he was extraditable under Dutch law was, at best, a moot point.

Moral of the story: if you live outside the United States and sell U.S. goods to Iran, postpone indefinitely any plans to visit Disneyland. (There is no indication of why Davis was in the United States. The reference to Disneyland is for illustrative purposes only.)

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Copyright © 2012 Clif Burns. All Rights Reserved.
(No republication, syndication or use permitted without my consent.)

May

14

eBay Busts Soldier in Iraq for Illegal Exports

Posted by Clif Burns at 5:24 pm on May 14, 2012

Category: Criminal Penalties

A recently filed criminal complaint accuses a former U.S. soldier of using eBay to export military items he obtained while serving in Iraq. Specifically, the defendant is accused of the unlicensed export of an Atilla-200 laser aiming device to Japan. The complaint details communications between eBay and the defendant which suggests that eBay tipped off federal investigators as to the export of the Atilla-200. As is often the case with criminal export prosecutions, the central issue in the case is whether the defendant had criminal intent since there seems to be little doubt that the export occurred and that no license was obtained.

The criminal complaint details three interviews between law enforcement and the defendant. In the first interview, conducted when the defendant was entering the United States through the Miami airport, the defendant allegedly admitted that he had stolen the item in question while serving in Iraq, but denied any knowledge of the International Traffic in Arms Regulations (“ITAR”) or its restrictions on the export of defense articles. In a second interview, conducted ten days later at the defendant’s home, he again admitted taking the item while on duty in Iraq. When asked why he had described the item in shipping documents as “used camera lens (optic),” he said that he did that as a result of instructions from the buyer and not because he was aware of ITAR restrictions on exporting the item.

Subsequently, the agents were given emails from the defendant’s Gmail account. One of these read as follows:

Sir,

Sorry late, I alrady [sic] payment.
Please check your paypal account
This
is ITAR itme[sic],If you ship,Please do not write AN PVS-14/7B or ATILLA-200
If you write invoice ex.car engine parts or car electronic parts ($100-$120)

In a third interview, conducted by telephone, the agent pointed out that the email quoted above mentioned that the ATILLA-200 was an ITAR item and instructed him to falsify the shipping documents. The defendant, according to the criminal complaint, continued to deny “that he knew what ITAR meant” and said that he had been truthful in prior interviews.

One semi-literate email from the Japanese purchaser seems a narrow thread on which to hang the required element of scienter, namely, that the defendant knew that the export was illegal. Certainly the defendant would have had a motivation to alter the shipping documents since he clearly knew that he had come into possession of the item illegally. But whether the email’s single reference to “ITAR itme” should have sent the defendant off to Wikipedia prior to shipping the item seems doubtful at best. It is equally reasonable to suppose that the defendant believed that ITAR was a garbled misspelling for some other word or was a Japanese term or any of a number of other possibilities. Indeed, if the defendant was dumb enough to list the item on eBay, it is not hard to imagine that he had no clue what the ITAR was or that the items required an export license.

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Copyright © 2012 Clif Burns. All Rights Reserved.
(No republication, syndication or use permitted without my consent.)

May

8

Dead Chickens By Sea: A Hard Warming Story

Posted by Clif Burns at 5:30 pm on May 8, 2012

Category: Agricultural Exports

Gulf Coast Cold Storage Usually criminal export defendants are in the dock for exports of night vision, stun guns, or high-tech chemical processing equipment. Today we have criminal defendants who were indicted for exporting insufficiently chilled chickens from Pascagoula, Mississippi to Russia, proving, I suppose, that even exporting chickens can be a dangerous business these days.

The indictment describes an alleged conspiracy by the three defendants, all employees at Gulf Coast Cold Storage, to remove dressed chicken carcasses from blast freezers before they had reached certain temperatures required by the trade agreement between the U.S. and Russia. In other instances, the defendants were alleged to have put chicken that reached higher than permissible temperatures back into the blast freezers.

Why, you must be asking, is the U.S. concerned about exports of warm chickens to Russia? Can they be weaponized into chicken wings of mass destruction? Will the warm chickens be served, pathogens and all, to Russian political prisoners? No, the warm chickens became criminal export violations through the wondrous intervention of the federal prosecutor’s jack-of-all-trades and catch-all statute, 18 U.S.C. Â§ 1001, a/k/a the Martha Stewart law, which can transform almost any activity otherwise legal under U.S. law into a federal crime. Just as Martha Stewart went to jail for lying about perfectly legal activities, so the Pascagoula Three risk jail time for an allegedly untrue statement on an export certificate with respect to processing techniques that would not themselves have violated U.S. law.

When required by importing countries, as is the case with Russia for poultry exports, the Food Safety and Inspection Service of the U.S. Department of Agriculture will issue an export certificate attesting that the product complies with the importing country’s requirements. The exporter fills out an application for that certificate on FSIS Form 9060-6 which has a certification at the end that “the product covered by this application for export meets the inspection requirements for the country of destination.” This was the alleged false statement that served as the basis of the 18 U.S.C. Â§ 1001 charge.

In order to sustain a conviction under 18 U.S.C. Â§ 1001, the prosecution must demonstrate that the defendants knew that their statements were false. United States v. Yermian, 708 F.2d 365 (9th Cir. 1983). Here that means that the prosecution must show that three guys working in a blast freezer in Mississippi were familiar with Russian law on chicken processing. That seems to be a heavy burden, although the indictment suggests that one or more of the defendants told others to report false chicken temperatures, which I suppose will be argued as proof that they knew the temperature requirements of Russian law.

And the moral of the story? It’s this: there is no product so benign or inconsequential that someone can’t figure out how to send you to jail for exporting it.

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Copyright © 2012 Clif Burns. All Rights Reserved.
(No republication, syndication or use permitted without my consent.)

May

7

The Sum of the Parts May Sometimes Be Greater than the Whole

Posted by Clif Burns at 6:39 pm on May 7, 2012

Category: BIS

Mattson Technology The Bureau of Industry and Security (“BIS”) recently released documents detailing a settlement that it entered into with Mattson Technologies relating to Mattson’s unlicensed exports of pressure transducers classified under ECCN 2B230. That ECCN covers pressure transducers with pressure sensing elements made of aluminum, nickel or certain alloys thereof and which meet a certain standard of accuracy set forth in the ECCN. Transducers of those specifications are needed for centrifuges producing weapons-grade uranium, and there is some evidence that the Iranians are actively acquiring or trying to acquire such devices.

The violations were voluntarily disclosed by Mattson. According to an SEC filing, the disclosure occurred in 2008 and the violations were said to be “inadvertent.” None of the transducers were shipped to Iran. However, transducers were shipped to Israel, Malaysia, Singapore, PRC and Taiwan and were valued at “approximately $78,000” according to the Charging Letter.

BIS disputed that the exports were inadvertent and claimed that, even though “in May 2006, one of Mattson’s supply chain partners informed it that pressure transducers that Mattson [used] required export licenses when shipped to Mattson customers in certain foreign countries,” Mattson went ahead and shipped these items without license. As a result, BIS fined Mattson $850,000, suspending all but $250,000 of that fine, which is still a hefty fine for matters that involved $78,253 in exports and were voluntarily disclosed. (I know, I know, the agency could have fined Mattson 43 trillion dollars — actually $11,750,000 at $250,000 for each of the 47 counts — but decided to cut Mattson some slack.)

One interesting takeaway from this case — other than that VSDs can be expensive — is how it appears that Mattson got into trouble here. Mattson, according to its website, “designs, manufactures, and markets semiconductor wafer processing equipment used in the fabrication of integrated circuits.” Apparently, these machines utilize pressure transducers; and it is likely that the transducers at issue were shipped as spare or replacement parts for these machines to foreign customers that had purchased Mattson’s processing equipment. The machines themselves may have been classified as EAR99. Often companies do not realize that even if a system may not require an export license, its component parts might when shipped separately from the system. That is an understandable area of confusion and likely what, at least in part, happened here. An essential part of export training is to teach employees that parts and components may have different ECCNs from the equipment to which those parts and components belong.

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Apr

30

Danger, Danger, Will Robinson! Deemed Exports Ahead!!

Posted by Clif Burns at 6:51 pm on April 30, 2012

Category: BIS • DDTC • Deemed Exports

Medical Lab A long article published today on the Bloomberg News website tells the story of a voluntary disclosure by Georgia Tech after one of its instructors inadvertently posted some export-controlled data on the Internet. The article follows this anecdote up with a ton of (virtual) ink about how universities are giving away all of our military secrets and how we shouldn’t be surprised when this results in the U.S. becoming a satellite province of China or Iran.

First, here’s what the story reveals about the Georgia Tech voluntary disclosure. According to the story, a research scientist at the university wanted to put course materials and videos of his lectures for his course “Infrared Technology and Applications” on a DVD because he was planning to retire and he wanted to use these materials to train his successor. When the university’s media staff encountered problems putting the video and materials on DVD, they suggested making the information available by a link. The research scientist approved this idea, thinking that it was an internal link, whereas it was an ordinary Internet link. The material was available online for about three weeks before the mistake was discovered and the materials were taken down. Although the video received hits only from the United States, some of the Powerpoint slides that were posted received hits from foreign countries, including 33 from China and one from Iran. The university disclosed this lapse to the Directorate of Defense Trade Controls which issued a warning letter but imposed no penalties, something which appears to have scandalized the Bloomberg reporter.

Above and beyond the description of the Georgia Tech voluntary disclosure, the article takes a Chicken Little approach to the dangers posed to national security by university research:

Eager to preserve their culture of openness and global collaboration, campuses are skirting — and even flouting — export-control laws that require foreigners to hold government licenses to work on sensitive projects.

To support this startlingly broad conclusion, the reporter humps the Roth case for all it is worth and cites some voluntary disclosures by several universities. That doesn’t much sound like “flouting” export rules to me, but perhaps Bloomberg has a different definition of that word.

For those familiar with the sorts of information which may be export-controlled (but not classified), it is hard to get too worked up about the national security implications of this. After all, business proprietary information about how to make handcuffs is controlled under the Commerce Department’s rules. Suffice it to say, things that are of real concern are classified. Accordingly, I am not scandalized when voluntary disclosures by universities relating to deemed exports result in warning letters rather than jail time for everyone involved as the reporter seems to think is appropriate. And because “fundamental research,” which is exempted from export controls, is an incredibly vague term that is difficult to apply in many contexts, overzealous enforcement of export rules to university research would have an unwarranted chilling effect on that research given the number of foreign students at almost every college and university. Well, I suppose colleges could adopt an American-only admissions policy, and I wouldn’t be surprised if there weren’t certain advocates of deemed export controls who secretly wish for such national homogeneity at our institutions of higher learning.

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