Export Control News & Alerts

The Export Control Update Newsletter
August 2007

CONTENTS

1. ITAR Rumors from Washington
2. US Defense Department Mistake Makes It Easier for Iran to Get F-14 Parts
3. Two Illegal Shipments = Six Violations = $66,000 Penalty
4. Despite Warnings, P.R.A. World Wide Trading Co. Makes False Value Statement on SED
5. Travelocity Gets Nailed for Booking Travel to Cuba

1. ITAR Rumors from Washington

Well, these are a bit more solid than rumors:

First: the State Department has said that it relaxed its burdensome dual-national/third country national requirements for foreign nationals from NATO, Australia, Japan and New Zealand. If an employee of a company on a TAA or MLA is a national of one of these countries, they will be considered to be authorized to receive the US defense articles covered by the TAA and MLA and the applicant will no longer be required to obtain a non-disclosure agreement form such nationals. This policy change should reduce the current TAA and MLA burdens once (if) the State Department actually implements the policy.

Second: State plans to put out new brokering regulations soon. We will not know if this is good news or bad news until the regulations come out.

— John Black

2. US Defense Department Mistake Makes It Easier for Iran to Get F-14 Parts

Put this one in the file: Exporters don't try this one at home or you could get burnt.

According to reports from Reuters, the Government Accountability Office (GAO) said that the US Department of Defense sold approximately 1,400 F-14 fighter aircraft parts to the public, making it much easier for Iran to get its hands on the parts it needs to support its fleet of F-14s. DOD suspended all sales of F-14 parts in January 2007, but accidentally sold more parts to the public after that.

While GAO said there is no evidence that Iran actually acquired the parts, it seems to me that having F-14 parts floating around on the public market certainly makes it easier for Iran to get its hands on them. What use would a member of the general public have for F-14 parts anyway?

Any company who possesses F-14 should exercise caution when it sells them because Iran is one of the few countries who actively flies F-14, which increases the risk that someone seeking the parts actually intends to sell them to Iran.

— John Black

3. Two Illegal Shipments = Six Violations = $66,000 Penalty

Zaharoni Industries, doing business as West Coasting Engineering, got its lesson in export compliance mathematics. That is, one illegal shipment can easily equal 3 violations: failing to obtain a license, exporting with knowledge that you knew you needed a license and didn't get one, and making a false statement on your SED saying you do not need a license. It’s the export violation trifecta that the US Government can easily impose in most export violations.

Apparently these guys shipped some integrated circuits via the UAE to Iran without the required US export license.

(Funny, but you would think the bad guys would realize that if they want to ship illegally to Iran, don’t ship via the UAE or the UK because the US Government has repeatedly said those are key illegal transshipment points for Iran, which means the US Government is more likely to be scrutinizing shipments to those countries when it is looking for illegal exports to Iran.)

Anyway, the dual-named exporter got off relatively easily and reached a settlement to pay a penalty of $66,000 for the two illegal shipments.

— John Black

4. Despite Warnings, P.R.A. World Wide Trading Co. Makes False Value Statement on SED

Two Lessons for Export Control 101:

1. If the US Government tells you stop understating the values you report on your Shipper’s Export Declarations (SEDs), you should stop understating the values.
2. Use export compliance as a criteria for choosing your freight forwarders.

PRA World Wide Trading, a freight forwarder, failed to heed US Government warnings, and according to its settlement agreement with the government, it made 41 false value statements after the US Government told it to stop. According to the settlement agreed, the reported value was less than 20% of the actual value.

So, you report a false value 41 times in this circumstance, you end up agreeing to pay a penalty of $250,000. Guess they should have illegally exported integrated circuits to Iran...

— John Black

5. Travelocity Gets Nailed for Booking Travel to Cuba

According to reports from the Miami Herald and elsewhere, well-known internet travel company Travelocity paid $183,000 fine for illegally booking approximately 1,400 Cuba trips between 1998 and 2004. (FYI, that comes to $130 per trip. The US trade embargo on Cuba prohibits US companies and their foreign subsidiaries from being involved with transactions that involve Cuba.

(OK, if you just went to www.travelocity.com to get a thrill from doing a test to see if you could book a flight to Cuba, you are an export control nerd.)

— John Black

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