by Gwen Green
On June 2, 2017, the U.S. Attorney’s Office for the District of Connecticut announced that Imran Khan, of North Haven, Connecticut, pleaded guilty to one count of violating the International Emergency Economic Powers Act. Court documents and statements show that from at least 2012 to December 2016, Khan and others participated in a scheme to purchase goods controlled under the Export Administration Regulations (“EAR”) and illegally exported those goods to Pakistan without a license. When asked about the end-user for the products, Khan allegedly made false statements to U.S. manufacturers that the products would remain in the U.S. Continue reading
by Gwen Green
A Singaporean national accused of taking part in a conspiracy to illegally export thousands of radio frequency modules from the U.S. to Iran was sentenced on April 27, 2017 to 40 months in prison. Lim Yong Nam, also known as Steven Lim, was indicted in June 2010 for conspiring to illegally export U.S. made radio frequency modules through Singapore to Iran. At least 14 of the illegally exported radio frequency modules were later found in unexploded improvised explosive devices (IEDs) in Iraq, according to a U.S. Department of Justice statement.
Lim was extradited to the U.S. in 2016 after being detained in Indonesia since October 2014 as he contested the U.S. request for extradition. Lim pleaded guilty on December 15, 2016 to a charge of conspiracy to defraud the U.S. by dishonest means. Continue reading
by Gwen Green
Fuyi Sun, a Chinese national, pleaded guilty on April 21, 2017 to violating the International Emergency Economic Powers Act in connection with a scheme to illegally export high-grade carbon fiber to China without an export license.
According to the complaint, Sun began trying to acquire the high-grade carbon fiber, including Toray type M60JB-3000-50B carbon fiber (“M60 Carbon Fiber”), for the Chinese military in 2011. M60 Carbon Fiber is used primarily in aerospace and military applications, including in unmanned aerial vehicles (i.e., drones). Sun admitted he tried to evade U.S. export control laws by using fraudulent documents and code words to conceal his efforts to purchase the high-grade carbon fiber for the Chinese military, according to prosecutors. Continue reading
by Gwen Green and Amani S. Floyd
On March 14, 2017, the D.C. Circuit dismissed a law firm’s challenge to the State Department’s application of the International Traffic in Arms Regulations (“ITAR”) Part 129 brokering provisions against practicing attorneys. In its lawsuit, law firm Matthew A. Goldstein, PLLC (“Goldstein”) alleged that the State Department lacked constitutional and statutory authority to apply Part 129 to legal services provided to its clients and sought declaratory and injunctive relief to prevent the State Department from applying the brokering provisions to the firm.
Regulation of Brokering Activities
The State Department regulates international arms brokering under the Arms Export Control Act (“AECA”) and the ITAR. The AECA mandates that “every person . . . who engages in the business of brokering activities with respect to the manufacture, export, import, or transfer of any defense article or defense service” shall register with the State Department and obtain a license before engaging in “the business of brokering activities.” The AECA further provides that “brokering activities shall include the financing, transportation, freight forwarding, or taking of any other action that facilitates the manufacture, export, or import of a defense article or defense service.” These requirements are implemented and further defined at Part 129 of the ITAR. Continue reading
by Gwen Green and Steven Pelak
On March 1, 2017, the First Circuit affirmed the nine-year sentence of Sihai Cheng, a Chinese national who pleaded guilty for his role in supplying over 1,000 pressure transducers to Iran’s nuclear program.
In December 2015, Cheng pleaded guilty to two counts of conspiring to commit export violations and smuggle goods from the United States to Iran and four counts of illegally exporting U.S. manufactured pressure transducers to Iran. On January 27, 2016, U.S. District Court Chief Judge Patti B. Saris departed upward from the Sentencing Guidelines and imposed a nine-year sentence, which is significantly beyond the otherwise applicable Guideline range. It should be noted that Chief Judge Saris has served as the Chairperson of the U.S. Sentencing Commission. Continue reading
by Steven Pelak and Gwen Green
The opinion issued on Tuesday, September 20 by the U.S. Court of Appeals for the Fifth Circuit in Defense Distributed, Second Amendment Foundation Inc. v. U.S. Dept. of State resolved for now an ongoing effort to obtain a preliminary injunction allowing the public release through the internet of weapon designs/technical data for the 3D printing/manufacture of AR-15s or assault rifle parts.
As a legal matter, the opinion is relatively limited and merely holds:
“In sum, we conclude that the district court did not abuse its discretion in denying Plaintiffs-Appellants’ preliminary injunction based on their failure to carry their burden of persuasion on two of the three non-merits requirements for preliminary injunctive relief, namely the balance of harm and the public interest. We therefore affirm the district court’s denial and decline to reach the question of whether Plaintiffs-Appellants have demonstrated a substantial likelihood of success on the merits.” Defense Distributed v. Dept. of State, ___ F.3d ___, slip op. at 13 (5th Cir. Sept. 20, 2016). http://www.ca5.uscourts.gov/electronic-case-filing/case-information/current-opinions
That said, in light of the lengthy dissent and the following quoted statement from the Court of Appeals, one might anticipate further legal challenge in the Fifth Circuit and to the Supreme Court: Continue reading
by Steven Pelak and Gwen Green
On January 20, 2016, the U.S. Department of State, Directorate of Defense Trade Controls (“DDTC”) announced the elevation of Lisa Aguirre to the position of Managing Director. Although DDTC has used the title of Managing Director in the past, this new role has different responsibilities from those held by previous Managing Directors.
As Managing Director, Ms. Aguirre will serve as deputy to the Deputy Assistant Secretary (“DAS”), acting when the DAS is unavailable, and dividing the DDTC front office responsibilities with the DAS. Prior to this appointment, Ms. Aguirre most recently served as Director of the Office of Defense Trade Controls Management. DAS Brian Nilsson has made an excellent and outstanding choice in his selection of Ms. Aguirre.
In light of emerging threats to U.S. national security, it is particularly important to have a judicious decision maker with a strong background in arms export controls such as Ms. Aguirre in such a critical position at DDTC. Ms. Aguirre has deep experience and knowledge in the AECA, the ITAR, and the role various law enforcement agencies and the intelligence community play in export controls. She understands well the important role of DDTC’s enforcement function in safeguarding the superiority of U.S. military technology, particularly with regard to constant efforts by the Chinese, Russian, and Iranian governments to obtain U.S. military technology. With the promotion of Ms. Aguirre and the October 2015 appointment of a new Deputy Assistant Secretary, DDTC has turned a corner. Under such professional and informed leadership, DDTC undoubtedly will serve the People effectively, independently, and wisely.
by Jason E. Prince and Steven W. Pelak
Consistent with the United States’ and Japan’s increasing focus on joint security cooperation, the U.S. Department of Defense (“DOD”) is seeking industry input on the negotiation of a reciprocal defense procurement pact with Japan’s Ministry of Defense. On December 31, 2015, DOD issued a Federal Register notice “asking U.S. firms that have participated or attempted to participate in procurements by or on behalf of Japan’s Ministry of Defense or Armed Forces to let us know if the procurements were conducted with transparency, integrity, fairness and due process in accordance with published procedures, and if not, the nature of the problems encountered.” Additionally, DOD is “interested in comments relating to the degree of reciprocity that exists between the United States and Japan when it comes to the openness of defense procurements to offers of products from the other country.”
The United States has entered into a reciprocal defense procurement memorandum of understanding with 23 other nations. According to DOD’s notice, such agreements strive “to promote rationalization, standardization, and interoperability of conventional defense equipment with allies and other friendly governments” and “provide a framework for ongoing communication regarding market access and procurement matters that enhance effective defense cooperation.” Typically, these agreements require both countries to conduct defense procurements in accordance with specific implementing procedures and to afford each other certain benefits consistent with national laws and regulations (e.g., waivers of customs, taxes, duties, and “Buy America” requirements for end products and components of defense procurements).
by Steven Pelak and Gwen Green
On December 28, 2015, the U.S. Department of Commerce, Bureau of Industry and Security (“BIS”) published a proposed rule revising its guidance on charging and penalty determinations in administrative enforcement actions under the Export Administration Regulations (“EAR”). The proposed changes would bring the agency’s guidance closely in line with the Economic Sanctions Enforcement Guidelines promulgated by the Department of the Treasury, Office of Foreign Assets Control (“OFAC”) and provide greater predictability and transparency to BIS administrative penalties. The proposed revisions to the BIS’s Guidance on Charging and Penalty Determinations (Supplement No. 1 to part 766 of the EAR) are open for comment until February 26, 2016.
Alignment with OFAC Guidelines
BIS implements the EAR under the International Emergency Economic Powers Act (“IEEPA”), the same statutory authority by which OFAC implements most of its sanctions programs. Under IEEPA, criminal penalties can reach 20 years imprisonment and $1 million per violation, and administrative monetary penalties can reach $250,000 or twice the value of the transaction, whichever is greater.
by Steven Pelak and Michael O’Leary
On Wednesday, the U.S. Department of Justice (DOJ) announced that Geoffrey Shank, has been sworn in as the new Washington Director of the International Criminal Police Organization (INTERPOL). See http://www.justice.gov/interpol-washington/pr/fbis-james-comey-swears-new-interpol-washington-director. As Director, Mr. Shank will act on behalf of the Attorney General as the official U.S. representative to INTERPOL. He previously served as the Deputy Director of Washington INTERPOL and has had a distinguished career within the U.S. Marshal’s Service spanning more than 25 years.
Through their energy, initiative, and drive, individuals do matter in law enforcement. The appointment of a well-respected and vigorous law enforcement official to the top post in the U.S.’s delegation to INTERPOL is a clear signal that efforts aimed at greater cooperation between U.S. and foreign law enforcement agencies will likely accelerate in the immediate future. Because of the particular importance of international cooperation and assistance by law enforcement in export controls and trade sanctions investigations and enforcement matters, Mr. Shank’s appointment will have particular importance for individuals and companies facing cross-border compliance issues in these areas.