The criminal complaint has yet to appear online but the press release states that the Hansons purchased the circuits from Canadian company, MicroPilot who told the two that the autopilots could be shipped to the US, but that exports from the US would need to be licensed. The Hanson’s told MicroPilot that the autopilots were destined for model flying clubs in China. MicroPilot was understandably suspicious and further inquired about the autopilots. Harold Hanson allegedly replied, “typical of Asian men, these modelers want the very best product on the market,” and signed a letter promising that he would not export the autopilots without a license from the US government.

Mrs. Hanson hand delivered the autopilots to China without a license, alleging that she “thought that they were destined for humanitarian purposes and for the flight clubs.” The Hansons later filed a claim with UPS asserting that they never received the $90,000 shipment from MicroPilot and it must be lost.

(Note to Potential Export Violators: You might not want to file claims with shippers or carriers related to item you illegally export. If you don’t mark up the price of the items to your customer, don’t try to increase your margins by filing false claims with the shippers or carriers.)

The autopilots are used for unmanned aerial vehicles (UAV) and micro aerial vehicles (MAV); they are classified under ECCN 9A012.b for national security, missile technology, and anti-terrorism reasons.

If convicted, Mrs. Hanson faces a maximum sentence of 20 years in prison and a $1 million fine.

More information:

• DOJ News Release (PDF)

The US tightened space technology-transfer rules in 1999 after investigators found China has acquired sensitive technology from US built commercial satellites. When the new rules were implemented they put commercial communications satellites, subsystems, and components on a munitions list that became subject to State Department licensing even if the product could be easily purchases worldwide.

The overall health of the top-tier manufactures in the industry such as Lockheed Martin Corp., Boeing Co. and Northrop Grumman Corp. all had “good financial health” despite the US industry’s loss of shares overseas. The report shows that Russia, China and others are gaining space market share aided by the US policy. Jeffery Foust, a space and telecommunications expert at Futron Corp explained that the US policy backfired in space. “The US is actually hurting national security by making it more difficult for the space companies it depends on to compete in the global market,” he said.

The study concluded that the ability for the government and industry to meet program execution commitments is inadequate and that there was a unanimous agreement that the export control process can be improved without adversely affecting national security.

More information:

• CSIS Briefing
• International Trade Law News article

Ms Wang-Woodford and her husband ran Monarch, which has been importing and exporting military and commercial aircraft components for more than 16 years. Brian Woodford remains fugitive since his wife was arrested on December 23, 2007 at San Francisco International Airport.

The indictment charges consist of charges of:

1. Conspiring to export aircraft parts to Iran
2. Several counts of exporting aircraft parts to Iran against the IEEPA
3. Conspiring to export defense articles without a license
4. Exporting and attempting to export defense articles without a license in violation of the AECA and ITAR
5. Conspiring to launder the proceeds of the unlawful export of defense articles
6. Illegal export of US military aircraft components
7. Falsely identifying components in export documents filed to the US government
8. Conspiring to transmit funds from Singapore to Cincinnati, Ohio with the intent to promote the illegal export scheme in violation of the federal money laundering statutes

When the defendant was arrested she was carrying 2 China National Precision Machinery Import and Export Corporation (“CPMIEC”) catalogs advertising surface-to-air missiles and rocket launchers. CPMIEC has been sanctioned by the United States Treasury Department, Office of Foreign Assets Control, as a Weapons of Mass Destruction proliferator. All US persons are prohibited from engaging in business with the company, meaning Wang-Woodford may be looking at additional charges after further investigation.Both Wang-Woodford and her husband are accused of selling sensitive hardware to Iran, including commercial aircraft components for over 16 years. While Wang-Woodford’s husband is wanted, she is facing a imprisonment for close to the rest of her life. She faces a maximum sentence of 10 years for each count of violating the IEEPA, AECA, and the ITAR and up to 20 years for conspiring to lauder money.

More information:

www.usdoj.gov/opa/pr/2008/February/08_nsd_083.html

The specific changes include:

1. Additional financial resources and intelligence support to provide timely adjudication of defense trade licenses
2. New guidelines requiring decisions by the U.S. Government on defense trade export license applications within 60 days unless there is strong reason for additional time which must be approved
3. The electronic licensing system will be upgraded to allow all types of defense trade licenses and their submission
4. An interagency will be created to allow for timely resolution of licensing jurisdiction issues under the Commodity Jurisdiction process
5. A multi-agency working group will be created to improve procedures for export enforcement investigations

The majority applauds the administration’s actions and feels that this will benefit all users. The Aerospace Industries Association and the Coalition for Security and Competitiveness all released statements commending the directive and welcoming it with open arms. Others however, are more skeptical of the reforms and especially the time that will be required to implement such a system. Donald Weadon, a congressional aid and expert on export controls, said the initiative, “fails to address the principal deficiencies of the current system, which are adversely impacting U.S. technology companies.” He also stressed that, “There is little chance that any of the elements touted will be implemented in the next 12 months, especially since they require significant increases in funding and acquisition of sorely needed secure computer systems and the training of skilled manpower.”

No exact dates have been released when the Department of State will begin to see changes and exactly how the changes will be implemented has yet to be released. It will be interesting to see how quickly the directives are executed and if they make a difference, as so many feel very confident about the reform and the impact it will have on the U.S. economy.

We unfortunately are not excited by the latest announcement and are waiting for proof that this is not just another case of a lot of talk that results in marginal and temporary improvement in the ITAR license review problems.

More information:

state.gov/r/pa/prs/ps/2008/jan/99562.htm

Trujillo and Waye would repackage the parts and assign them commercial part numbers and even invoiced them as “gear sprockets” to guarantee that the parts would not be conspicuous. They intended on exporting the parts to Canada where they would then go to Iran where the only F-14 are flown.

The men are charged by the U.S. Attorney for Utah with 3 felony counts. The felony information includes attempted export of the F-14 and F-4 fighter aircraft parts without a license, attempted export of F-14 wiring harnesses and impeller assemblies and the repackaging to the goods.

China claimed that the U.S. policy was the largest hurdle to be faced by the growth of new actors in the industry, while India claimed that there is more risk to non-US players because of the ITAR rules

(Hmmmm, I guess the US Government is glad to hear that news, because that is exactly the intent of the ITAR. — John Black)

Hua Changzhi, vice president of China Great Wall Corp. pointed out those U.S. satellite manufacturers had lost market share in recent years, he remarked, “This is the price paid by U.S. policy”. Ray A. Williamson, research professor, Space Policy Institute at George Washington University in the United States said that change in ITAR would make it easier for the international space industry to operate, “unfortunately, given the current political situation in the United States, I don’t think ITAR regime will change for the next five to ten years”.

Executive director of Antrix Corp Ltd, the commercial arm of Indian Space Research Organization, K.R. Sridhara Murthy called for addressing certain issues at a political level especially regarding the export policies of advanced countries. Murthy also called for a unified licensing system for space services and complementary ground services and also underlined a need to change policy and regulations to facilitate easy access to remote sensing data used by many companies. Another one of his concerns was the merger of smaller companies with the “big players” in the industry, explaining that the dominant players in the industry hurt the market and consumers. The industry is also faced with the fact that the orbit and spectrum resources are in the hands of the governments.

More information:

US regulations restrict space industry growth (Earth Times)

US regulations restrict space industry growth (India PR Wire)

According to the report, the Chinasat 6B telecommunications satellite is the fourth satellite built for the Chinese satellite-fleet operators by Thales Alenia Space. And it looks like it doesn’t cost all that much to avoid ITAR components. According to the report, avoiding ITAR restrictions added approximately six percent to the cost of the satellite due to lack of options in choosing more competitive parts suppliers and the currency used in payment. Thales Alenia Space has pointed out going to a fully ITAR-free product line is out of the question because of the risk of not being able to keep up with the market demand as ITAR-free satellites rely on a supply chain that would have difficulty increasing deliveries in the short term. This sale might be a scary prospect for US satellite makers and US satellite component suppliers. The State Department will not approve license for transfers of US satellites or foreign-origin satellites with US content to China. Now Thales seems to have a monopoly on sales of satellites to China, or, at least Thales is going to get sales that neither US satellite manufacturers nor any foreign manufacturers who use ITAR components will get. Clearly, in attempting to prevent satellite sales to China, the US has used the ITAR to dam up most of the river while leaving an opening wide enough to launch a Thales satellite through. So, the Chinese get communication satellites and US manufacturers get bumpkiss (i.e., nothing). Well, perhaps US policy makers still feel good about the symbolic nature of the US “no satellite sales to China” policy, and as US policy makers are perched high atop their self-designated moral high ground, they will have a clear view of the ITAR-free satellite sales to China.

I will not ask if anybody in the US Government has unofficially threatened Thales or attempted to convince Thales to not go down the ITAR-free path.

Specifically, in Category XV of the US Munitions List in the ITAR, paragraph (d)(4) was changed from single event upset rate of 1 X 10 to the minus seven power to a single event upset rate of 1 X 10 to the minus ten power.

This paragraph (d) in Category XV controls any device with all five of the rad hardening characteristics in (d)(1) – (5). If a device does not have all five of those characteristics, it falls under the jurisdiction of the EAR. Of course, any device designed, modified, configured or adapted for space use falls under the ITAR regardless of its rad hardening characteristics.

• development of comprehensive training materials on export control investigations and prosecutions for federal prosecutors nationwide
• solicit and receive regular progress reports from U.S. Attorneys’ offices on the development of export control cases
• coordinate between the Justice Department and the many other U.S. law enforcement, licensing and intelligence agencies that play a role in export enforcement.

Attorney General Alberto Gonzales mentioned in his June 11 speech on nuclear terrorism that the Justice Department’s National Security Division where federal prosecutors were provided instruction and guidance on export control cases, with trainers from the Justice Department and the relevant investigative agents on hand providing comprehensive prosecutorial instruction.

In the past months, the Justice Department brought charges or prosecuted cases involving illegal exports of Naval warship technology to China, technology to Indian missile facilities, arms to terrorists in Sri Lanka, military night vision data to China, as well as military helicopter data to foreign nations.

According to Justice, some recent export control prosecutions are:

U.S. Naval Warship Data to China

On May 10, 2007, following a six-week jury trial, Chi Mak, a former engineer with U.S. Navy contractor Power Paragon, was found guilty on all counts of a superseding indictment charging him and four others with a variety of offenses stemming from the illegal export of military technical data on the U.S. Navy warships to China. Court documents in the case alleged that co-conspirators from China provided Mak with lists that requested specific information, including U.S. Naval research related to nuclear-powered submarines, for delivery to China. The investigation was conducted by the FBI and the Naval Criminal Investigative Service. The case is being prosecuted by the U.S. Attorney for the Middle District of California.

Missiles, Arms to LTTE Terrorists, Indonesian Military

On May 10, 2007, Thirunavukarasu Varatharasa pleaded guilty to conspiracy to provide material support to a designated foreign terrorist organization and attempted export of arms and munitions. Varatharasa conspired with Haji Subandi, Haniffa Osman and Erik Wotulo to provide surface-to-air missiles, machine guns, night vision devices, and other weapons to the Liberation Tigers of Tamil Eelam (LTTE) in Sri Lanka. All four have pleaded guilty in connection with the scheme. Two additional defendants, Reinhard Rusli and Helmi Soedirdja, have also pleaded guilty to arms export violations as part of a plot to provide arms to the Indonesian military. The investigation was conducted by ICE, DCIS, and the FBI. The case is being prosecuted by the U.S. Attorney for the District of Maryland.

Ivory Coast

Yssouf Diabate was sentenced to 48 months in prison for attempting to illegally export handguns, semi-automatic firearm components and laser sights to the Ivory Coast. The investigation was conducted by ICE and DCIS. The case is being prosecuted by the U.S. Attorney for the Southern District of California.

Technology to Ballistic Missile Facilities in India

On April 3, 2007, Parasarathy Sudarshan was arraigned in federal court in Washington, D.C. on charges of illegally exporting restricted U.S. technology to Indian state entities involved in ballistic missile development; acting as an illegal agent of India and exporting military technology to India for the development of a new fighter jet. He was one of four defendants indicted in the case. He and another defendant, Mythili Gopal, were arrested in South Carolina on March 23. The investigation was conducted by the FBI, the Commerce Department and ICE. The case is being prosecuted by the U.S. Attorney for the District of Columbia.

Black Hawk Helicopter Technical Data Overseas

On March 28, 2007, Axion Corporation, an Alabama defense contractor, and its owner, Alexander Latifi, were charged with illegally exporting Black Hawk military helicopter technical data overseas, fraud involving aircraft parts and submitting false documents. The investigation was conducted by the National Aeronautics and Space Administration (NASA) Office of Inspector General, DCIS, ICE, FBI, and the IRS, and is being prosecuted by the U.S. Attorney for the Northern District of Alabama.

Ballistic Helmets to Surinam

On March 28, 2007, Virginia-based company, Alpine Armoring, Inc., pleaded guilty to the illegal export of ballistic helmets to Surinam. The company and its president, Fred Khoroushi, also pleaded guilty to making false statements on a shipper’s export declaration. The investigation was conducted by the Commerce Department, ICE, and DCIS. The case was prosecuted by the U.S. Attorney’s Office for the District of Columbia.

Military Night Vision Technology to China, Singapore, U.K.

On March 27, 2007, ITT Corporation, the leading manufacturer of military night vision equipment for the U.S. Armed Forces, agreed to pay a $100 million penalty and admitted to illegally exporting restricted night vision data to China, Singapore, and the United Kingdom. The company also pleaded guilty to charges that it omitted statements of material fact in required arms exports reports. The $100 million penalty is believed to be one the largest ever in a criminal export control case. As part of the plea agreement, ITT Corporation must invest $50 million of the penalty toward the development and deployment of the most advanced night vision systems in the world for the U.S. Armed Forces. The investigation was conducted by DCIS and ICE. The case is being prosecuted by the U.S. Attorney for the Western District of Virginia.

Machine Guns, Arms to Indonesia

On Jan. 18, 2007, Hadianto Djuliarso pleaded guilty to charges of conspiracy to violate the Arms Export Control Act and money laundering in a scheme to purchase and illegally export more than $1 million worth of machine guns, sniper rifles and other weapons to Indonesia. Djuliarso also made inquiries into purchasing Sidewinder missiles and strafing ammunition. Three other defendants have pleaded guilty in this scheme. The investigation was conducted by ICE and DCIS, and is being prosecuted by the U.S. Attorney for the Eastern District of Michigan.

Military Combat Simulation Software to China, Malaysia, Thailand

On Dec. 14, 2006, Xiaodong Sheldon Meng was charged with stealing military combat and commercial simulation software from Quantum3D, his former employer in California, and using these materials in demonstration and sales proposals to the government of China, the Malaysian Air Force and the Thailand Air Force. Much of the software was designed exclusively for military applications and for precision training of fighter pilots in night vision scenarios. The investigation was conducted by the FBI and ICE. The case is being prosecuted by the U.S. Attorney for the Northern District of California.

— Hannah Bandalan