Export Control News & Alerts

The Export Control Update Newsletter
April 2007

CONTENTS

1. Alpine Armoring Pleads Guilty to Illegal Export of Ballistic Helmets — $200,000 in Fines
2. International Boycott Country List Updated by State
3. US Imposes Nonproliferation Sanctions against 14 Foreign Entities, including Chinese, Singaporean, Malaysian, and Mexican Entities
4. ITAR Amendment for Exports to Vietnam
5. Genocide in Sudan: Google Restricts Download of Google Earth in Sudan
6. Mak Spy Trial: Is Prosecutor Misreading ITAR “Public Domain?”
7. Poor Navigators? Lethal Weapon Charters and Owner Pay $17,000 in Fines for Fishing in Cuban Waters
8. Indian National Indictments Muddy the Water for US/India Nuclear Deal
9. Lockheed Martin Memory Stick Found at Gas Station
10. Department of Homeland Security Effects Name Changes for ICE/CBP

1. Alpine Armoring and Alpine President, Fred Khoroushi Plead Guilty to Illegal Export of Ballistic Helmets — Pay $200,000 in Fines

On March 27, 2007, Alpine Armoring (Herndon,VA) and its president, Fred Khoroushi pled guilty to charges of illegally exporting ballistic helmets to the Centrale Bank Van Suriname in the Republic of Suriname in South America. The helmets are controlled by the Department of Commerce and required a license for export. In the Shipper’s Export Declaration (SED), Khoroushi included a false statement that no license was required for the shipment.

Khoroushi and Alpine Armoring will pay $200,000 in criminal and civil penalties. The maximum penalty for Khoroushi’s offense of making false statements on an SED is one year in prison and a fine of $100,000.

Source:

• U.S. Attorney’s Office, Eastern District of Virginia (PDF)

 

— Jill Kincaid

2. International Boycott Country List Updated by State

In late March, 2007, the Department of Treasury released the most current list of countries which require, or may require, cooperation with an international noycott within the meaning of section 999(b)(3) of the Internal Revenue Code of 1986.

The list includes:

• Kuwait
• Lebanon
• Libya
• Qatar
• Saudi Arabia
• Syria
• United Arab Emirates
• Yemen

Republic of Iraq is not on this list but its status is currently under review by the Department of Treasury and it may be added in the future.

Source:

• Federal Register - April 3, 2007 (Volume 72, Number 63, Page 15934)

 

— Jill Kincaid and John Black

3. US Imposes Nonproliferation Sanctions against 14 Foreign Entities

Includes Chinese, Singaporean, Malaysian, and Mexican Entities

In the April 17, 2007, Federal Register the US State Department announced sanctions on 14 new entities due to actions that potentially make a material contribution to the development of Weapons of Mass Destruction in Iran and Syria. The sanctions prohibit export license approvals and US Government procurement from, assistance to, and exports to the listed entities. The sanctions have little impact on the newly listed entities in Syria and Iran because those countries are already subject to comprehensive US trade sanctions.

Specifically, the sanctions on the entities are:

1. No department or agency of the U.S. Government may procure goods, technology or services from listed entities.
2. No department of agency of the U.S. Government may provide assistance to listed entities.
3. No department or agency of the U.S. Government may sell any item on the United States Munitions List to listed entities.
4. No new licenses for transfer of items controlled under the EAR or the Export Administration Act of 1979 will be granted and all existing licenses will be suspended for transfer to listed entities.

The Listed Entities are:

• China National Precision Machinery Import/Export Corporation (CPMIEC) (China) and any successor, sub-unit, or subsidiary thereof
• Shanghai Non-Ferrous Metals Pudong Development Trade Co. Ltd. (China) and any successor, sub-unit, or subsidiary thereof
• Zibo Chemet Equipment Company (China) and any successor, sub-unit, or subsidiary thereof
• Challenger Corporation (Malaysia) and any successor, sub-unit, or subsidiary thereof
• Target Airfreight (Malaysia) and any successor, sub-unit, or subsidiary thereof
• Defense Industries Organization (DIO) (Iran) and any successor, sub-unit, or subsidiary thereof
• Hizballah and any successor, sub-unit, or subsidiary thereof
• Sokkia Singapore PTE Ltd. (Singapore) and any successor, sub-unit, or subsidiary thereof
• Army Supply Bureau (Syria) and any successor, sub-unit, or subsidiary thereof
• Syrian Air Force (Syria) and any successor, sub-unit, or subsidiary thereof
• Syrian Navy (Syria) and any successor, sub-unit, or subsidiary thereof
• Industrial Establishment of Defense (Syria) and any successor, sub-unit, or subsidiary thereof
• Challenger Corporation (Malaysia) and any successor, sub-unit, or subsidiary thereof
• Target Airfreight (Malaysia) and any successor, sub-unit, or subsidiary thereof
• Aerospace Logistics Services (Mexico) and any successor, sub-unit, or subsidiary thereof
• Arif Durrani (Pakistan)

The penalties will be in effect for 2 years unless the Secretary of State deems otherwise.

Source:

• Federal Register - April 23, 2007 (Volume 72, Number 77, pp. 20158-20159)

 

— John Black

4. ITAR Amendment for Exports to Vietnam

In the April 3, 2007 Federal Register the Department of State amended the ITAR to announce that it will consider applications for the sale, lease, export or transfer of non-lethal defense articles and services to Vietnam. The policy will be to consider on a case-by-case basis licenses or approvals for imports or export of non-lethal defenses items/services either originating from or destined for Vietnam. Licenses and approvals for lethal defense articles and services will be denied. Exports of lethal end-items and their components will also be denied unless the components are non-lethal, safety-of-use spare parts. Non-lethal crowd control defense items/services and night vision devices to be used for ground security will not be approved.

Comments regarding this amendment may be addressed to

Source:

• Federal Register - April 3, 2007 (Volume 72, Number 63, pp. 15830-15831)

 

— Jill Kincaid and John Black

5. Genocide in Sudan: Google Restricts Download of Google Earth in Sudan

Maybe Google Needs a New Export Compliance Consultant or Lawyer

In an effort to highlight the Government of Sudan’s systematic genocide against the “non-Arab” people in Darfur, Google Earth has added information to its internet software which allows internet surfers to view evidence of the horrific acts being committed there. These changes to Google Earth went into effect in early April. At about the same time, Sudanese citizens began to notice that they could no longer download Google Earth from Google’s servers.

The initial speculation was that Sudan’s government had blocked access to Google Earth so that its people would be shielded from the harsh reality of its rule. (We personally didn’t speculate like that because we figured the people being massacred by the Government of Sudan probably already had a good idea of what was going on, and the other people in Sudan (e.g., the people of Southern Sudan) have previously themselves experienced the Government of Sudan’s tactics of using mass killings, burning down entire villages, kidnappings, slavery, rape, and denial of international aid supplies to wipe out groups of people it doesn’t like.)

According to Google spokesperson, Megan Quinn, “in accordance with US export controls and economic sanctions and regulations, we are unable to permit the download of Google Earth in Sudan”.

I disagree with Google’s reading of the Treasury Department Sudan sanctions rules as they apply to the free Google Earth. Treasury normally excludes from its prohibitions “informational materials” which closely resembles the concept of “publicly available” in the Export Administration Regulations. The free Google Earth seems to meet these definitions and be free from Treasury restrictions. Google Earth Plus ($20) and Google Earth Pro ($400) likely are prohibited by Treasury regulations, although an argument could be made that Plus may also be OK.

NOTE: OK, this is just arm chair consulting here. I don’t have all the facts about exactly how Google does business, and, honestly, I haven’t taken the time to research Google.

(And, duh, by the way, did anybody ever stop to think how somebody in Sudan could even have a computer?? Virtually all computers are subject to US jurisdiction, either because they incorporate US components or because they use Microsoft software. US trade controls prohibit all transfers of such computers to Sudan, but, obviously prohibiting the transfers does not necessarily prevent the transfers.)

Now, even if Treasury Department rules did prohibit the download of free Google Earth, anyone with any sort of internet savvy can utilize software tools such as “Tor” that make it impossible for Google’s servers to tell where they are accessing from (unless Google prevents all downloads from Tor), and thus possible to access Google Earth from Sudan.

In any event, if you want to see evidence of the Government of Sudan’s efforts to wipe the “non-Arab” peoples of Darfur, you can get the free Google Earth at earth.google.com and navigate Google Earth to the African continent where you will see a special link “Crisis in Darfur.” If you want to find out more about the atrocities in Darfur, I recommend you get the book Not on Our Watch, the Mission to End Genocide in Darfur and Beyond by Don Cheadle and John Prendergast.

Source:

• Sudan Tribune - April 25, 2007, Author: Stefan Geens

 

— John Black

6. Mak Spy Trial: Is Prosecutor Misreading ITAR “Public Domain?”

The espionage court case of United States versus Chi Mak may soon come to a conclusion. Mak, who has worked for many years in Southern California’s defense industry, allegedly took computer disks from his employer, Power Paragon (Anaheim, CA) which contained information about a Navy warships program on which he was the lead engineer. He also allegedly emailed sensitive information to his home computer which he then downloaded onto CD’s which were encrypted by his brother who intended to pass them on to the Chinese authorities. Mak has admitted lying to FBI agents during their interrogations though he maintains that he didn’t know that his actions were illegal.

One question at the center of this case is the defense’s claim that the information copied and transferred was in the public domain, or not well protected. The prosecution has argued that even the transfer of public domain information violates the Arms Export Control Act because China is an embargoed country and the normal exemptions for public domain information do no apply. The prosecution’s argument is based on sections (126.1a) of the ITAR which refer to specific exemptions and the fact that such exemptions can’t be used to export to embargoed countries.

If (and that’s a big “if”) the information satisfies the ITAR definition of “public domain” then the ITAR does not apply to it at all-public domain data is no more subject to the ITAR than Time magazine. Public domain data does not require an exemption because it is excluded from ITAR jurisdiction because public domain data is not part of the ITAR definition of “technical data.”

Sources:

• Prosecution Run A-Mak - ExportLawBlog, March 27, Author: R. C. Burns
• FBI Frets in Spy Case Over China - New York Sun Online, May 3, 2007, Author: Josh Gerstein

 

— Jill Kincaid and John Black

7. Poor Navigators? Lethal Weapon Charters and Owner Pay $17,000 in Fines for Fishing in Cuban Waters

Who would have thought it? All the good fish are in Cuban waters.

Lethal Weapon Charters, Inc. and owner, Ted Baier (Key West, FL) will pay $17,000 in fines for taking their charter boat, the “Lethal Weapon” into Cuban waters on charter fishing expeditions on two occasions. The company and Mr. Baier were charged with exporting a vessel without the required license and with acting with knowledge of a violation. Baier had signed a Coast Guard document acknowledging that he knew that a license was required to sail into Cuban waters.

Baier and Lethal Weapon Charters, Inc. will pay a combined $17,000 to settle the charges with an additional $17,000 suspended on the condition that no further violations are committed during the suspension period of one year.

As Clif Burns wonders in his April 30, 2007 Export Law Blog, is the BIS really spending it’s time well in prosecuting cases of this type? The regulations are created in order to deprive the Cuban government of revenue generated by the U.S. Fishing in Cuban waters will, if anything, take money away from Castro.

Sources:

• One That Should Have Gotten Away - ExportLawBlog, April 30, 2007, Author: Clif Burns
• BIS Settles Export Control Case against Lethal Weapon Charters, Inc. and Ted Baier -
  The Daily Bugle, April 4, 2007, Author: Gary L. Stanley

 

— Jill Kincaid

8. Indian National Indictments Muddy the Water for US/India Nuclear Deal

It appears that the indictments of four Indian nationals for export violations have muddied the water on the US-India nuclear cooperation talks. The talks between India and the US are important to India in terms of its civil nuclear capacities. Good relations with the US could pave the way for the lifting of restrictions by the Nuclear Suppliers Group (a group of countries who implement guidelines for exports of nuclear items and nuclear-related items to prevent the proliferation of nuclear weapons) on exports to India. Symbolicly, at least, successful talks with the US could also signal that the United State implicitly accepts the legitimacy of the Indian nuclear weapons program, even though the Indians (like the Pakistanis and Israelis) developed their nuclear weapons in direct violation of the Nuclear Non-Proliferation Treaty.

Negotiations between India and the US were in their final stages when the indictments came down in early April. The four entities--the CEO of Cirrus Inc. of South Carolina and three other employees-were charged with violating US export control laws by exporting sensitive, controlled technology to India. All four are Indian nationals. The exports included heat-resistant computer chips which can have use in missile guidance systems. Other exports included electronic components with uses in aircraft navigation systems.

The fact that the companies involved with the alleged illegal export are related to the Indian Government is particularly embarrassing to India. This is a time when they want to look the epitome of responsibility and these allegations cast doubts on that. The companies involved were Vikram Sarabhai Space Center (under India’s Department of Space), the Aeronautical Development Establishment (under India’s Ministry of Defense) and Bharat Dynamics, Ltd.

Even without this latest glitch, the US and India are having some trouble ironing out the final details of the agreement. Sticking points for India include the provision that all nuclear equipment and fuel given to it by the US will have to be returned in the event that India conducts a nuclear weapons test. They also want the rights to reprocessing of spent fuel. Some Indian officials claim that the United States continues to “move the goalposts” as talks continue.

The United States maintains that it has done its part in meeting its commitments and hopes that India will do so as well.

Sources:

• The Washington Times Online - April 3, 2007, Author: Bill Gertz
• The Asia Times Online - April 6, 2007

 

— John Black and Jill Kincaid

9. Lockheed Martin Memory Stick Found at Gas Station

Lockheed Martin reports that no sensitive information was on a memory stick which an Azle, Texas truck driver found at a gas station. An employee of the Bethesda, MD based Lockheed who works in the jet program inadvertently dropped the stick. The truck driver, Glen Frausto, found the stick and plugged it into his home computer. He was surprised enough to call the FBI when he saw that the stick contained data and diagrams pertaining to a military jet being developed by Lockheed Martin.

At this point, the FBI is not investigating any wrongdoing or release of classified information. Lockheed stated that the employee had not broken any rules by having the memory stick with him. The jet referred to is the F-35 joint strike fighter which is currently involved in test flights. It will likely replace older jets currently being used by the military such as the F-16 and F-18.

(I wonder if anybody checked the citizenship of the “Texas” truck driver? —John Black)

Sources:

• The Boston Globe Online - April 19, 2007
• The Examiner Online, April 18, 2007

 

— Jill Kincaid

10. Department of Homeland Security Effects Name Changes for ICE/CBP

As of April 17, 2007, The Bureau of Immigration and Customs Enforcement and the Bureau of Customs and Border Protection are no longer “bureaus.” The Department of Homeland Security announced that the official names for these departments will now be U.S. Immigration and Customs Enforcement (ICE) and U.S. Customs and Border Protection (CBP). All official documents referring to these agencies should now use these names/acronyms.

— Jill Kincaid

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