Archive for the ‘Export License’ Category

Middle Man in Illegal Exports Debarred for 8 Years

Tuesday, September 6th, 2016 by Danielle McClellan

By: Danielle McClellan

Walter Anders and his company Terand, Inc. (he was the sole employee) of Huntersville, NC has been debarred for 8 years for his connection in exporting carbon fiber to Singapore. Anders and his company were used as a middle man to send illegal exports from a company in Middlewtown, NY to a company in Singapore in exchange for multiple $1,400 kick backs.

In 2012, Performance Engineered Nonwovens, of Middletown, NY, was contacted by BIS and told that their license to export T300 carbon fiber (ECCN 1C210.a) to Singapore was revoked due to the concerns surrounding the recipient. Performance Engineered Nonwovens then sought out to find a way to conceal the shipments to Singapore, cue Walter Anders and Terand.  Within a few weeks Anders and the president of Performance Engineered Nonwovens, Peter Gromacki, agreed to have Terand falsely act as the US exporter of record for exports of the items to Singapore in return for a $1,400 commission for each successful export.

Terand created and issued commercial invoices on letterhead that falsely named Terand as the exporter and falsely stated that, “This commodity technology exported from the United States is in accordance with the Export administration Regulations.” The company also acted as the intermediary between Performance Engineered Nonwovens and the freight forwarder, providing instructions to the forwarder, signing any and all required shipping documents, and receiving status reports on the progress of exports to Singapore. Terand also appeared as the US Principal Party in Interest (USPPI) on all of the Shipper’s Export Declarations (SED) that were filed.

Over the course of 2012 Terand made 8 exports of T300 carbon fiber to Singapore (approximately 6,557kg). Gromacki (Performance Engineered Nonwovens president) ensured that this process would continue and told Walter Anders that, “You continue to play a crucial role. I cannot export without your help and hence the commission checks will continue to flow in your direction.”

Walter Anders and his company, Terand, have been charged with 8 counts of Causing, Aiding, and/or Abetting Unlicensed Exports. The 8 illegal exports were valued at $288,736, Anders received $11,200 in commissions and 8 years of debarment.

Federal Register: https://www.federalregister.gov/articles/2016/08/19/2016-19819/in-the-matter-of-walter-anders-10701-huntersville-commons-drive-suite-c-huntersville-nc-28078-terand

DDTC Agreements Guidelines Updated

Tuesday, September 6th, 2016 by Danielle McClellan

On August 11, 2016, the Directorate of Defense Trade Controls (DDTC) announced its newest revision to the Guidelines for Preparing Agreements, which will become effective September 1, 2016. The changes will bring the Agreement Guidelines in line with certain revisions to the International Traffic in Arms Regulations (ITAR) that will also take effect on September 1, 2016.
Highlights of the changes:

  • Various sections of the Agreement Guidelines have been updated to reflect the new definitions for the terms “export,” “reexport” and “retransfer” that will go into effect on September 1.
  • Revision of Section 3.5: Dual/Third Country National (DN/TCN) to remove § 124.16 from Option 2, add references to § 126.18(d) in Option 1, redact the term “retransfer” from the guidance and required statements, remove country of birth as a consideration when vetting DN/TCNs via Option 2, update the required agreement statements for DN/TCN requests pursuant to § 124.8(5), and remove the optional agreement statement for § 126.1 non-(a) TCN requests.
  • The required statements throughout the Agreement Guidelines are updated, including the statement on sublicensing to U.S. Persons, the required statements for DN/TCN requests pursuant to § 124.8(5), and the § 124.8(5) verbatim clause.
  • Templates in Appendix A are updated to remove the § 124.12(a)(10) statement from the transmittal letter, remove the § 124.16 statement from the agreement, and update the required statements mentioned above.

Note:  Applicants are not required to submit an amendment for the sole purpose of updating these statements or removing the § 124.16 statement.  However, the statements must be updated at the next major amendment.  All agreement/amendment applications submitted after September 1, 2016, must include the new required statements, if applicable.  If an old statement is used, a proviso will be added instructing the applicant to change it prior to execution.  Applicants may begin using the new statements prior to September 1.

The templates in Appendix A have been updated to: – Remove the § 124.12(a)(10) statement from the transmittal letter – Remove the § 124.16 statement from the agreement – Update the mandatory statements listed above.

Revised Guidelines: https://www.pmddtc.state.gov/licensing/documents/agreement_guidelinesv4.4.pdf

Summary of Changes: https://www.pmddtc.state.gov/licensing/documents/agreement_guidelines_preamblev4.4.pdf

BIS Extends Temporary General License for ZTE Entities

Tuesday, September 6th, 2016 by Danielle McClellan

On March 24, 2016, a final rule was published that created a temporary general license that allowed, for a short time period, two entities (ZTE Corporation and ZTE Kangxun) that had been added to the Entity List on March 8, 2016, to be able to take part in exports, reexports, and transfers (in- country).

BIS has decided to extend the temporary general license until November 28, 2016. Due to this extension, the final rule will remove the date of August 30, 2016 and substitute the newest expiration date of November 28, 2016. No other changes have been made to the license.

Federal Register Notice: https://www.gpo.gov/fdsys/pkg/FR-2016-08-19/pdf/2016-19828.pdf

Screen Your Parties’ Addresses & Screen Before Shipments: Experienced and Sophisticated Company Fined $90,000 for One Export of EAR99 Item

Tuesday, September 6th, 2016 by Danielle McClellan

By: Danielle McClellan

Spectrolab is an experienced and sophisticated exporter, according to BIS’s Order related to the illegal export of a Large Area Pulsed Solar Simulator (EAR99).  You may be thinking, EAR99 items don’t need a license so how is there an illegal export, but as the title states…screening is important and will find violations that otherwise are not obvious to the naked eye.

In this case, Spectrolab sold and transferred a Large Area Pulsed Solar Simulator to a party on the Entity List in Pakistan. SUPARCO (Pakistan’s Space and Upper Atmosphere Research Commission) was added to the list in 1999 after it was found that they were involved in nuclear or missile activities. SUPARCO used a procurement agent to obtain the simulator from Spectrolab in 2014. Initially the agent said the item was for Pakistan’s Institute of Space Technology (IST) but soon after Spectrolab was made aware that SUPARCO was involved in the transaction. The procurement agent provided Spectrolab with the names and every party involved in the transaction except SUPARCO. Spectrolab screened the names, but not the addresses that they received from the agent which would have alerted them that SUPARCO was on the Entity List as their address was listed as IST.

Spectrolab even hosted an inspection and training session on installation and operation with an engineer from SUPARCO. The engineer even attended the training wearing a SUPARCO badge. As a result, Spectrolab was fully aware that SUPARCO was the end user of the simulator before they ever exported it. Spectrolab failed to run or re-run its screening software to screen either the SUPARCO name or address in connection with the final shipment, a direct contradiction of their own export compliance plan.

There were a few things that went wrong in this case for Spectrolab:

  1. They didn’t screen the companies address; if this was initially done the entire process would have stopped before it even started. BIS noted in the Order that Spectrolab used an export control screening software.
  2. No one raised the question of why the engineer worked for SUPARCO instead of IST or why the end user was SUPARCO instead of IST. This is really where the break down occurred
  3. They didn’t re-run their screening software before shipping the item to Pakistan

The biggest take away from this case is to screen everything about your customers, and that the government expects you to catch on to oddities related to your shipments. In this case, the company name changing, it’s not surprising that no one knew that SUPARCO was on the Entity List, there’s thousands on that list. The issue is that there was a red flag with SUPARCO coming into the transaction but not being listed on the documents. Entities who are on the denial list will be sneaky, and BIS expects you to catch that…that just didn’t happen in this case.

Order:  https://efoia.bis.doc.gov/index.php/electronic-foia/index-of-documents/7-electronic-foia/227-export-violations

Entrapment or Conspiracy? Either Way…Woman Sentenced to Over 4 Years in Prison for Conspiracy to Export to China

Tuesday, September 6th, 2016 by Danielle McClellan

By: Danielle McClellan

Wenxia Man, aka Wency Man, 45 of San Diego, was sentenced this month to 50 months in prison for conspiring to violate the Arms Export Control act by trying to export and cause the export of fighter jet engines, an unmanned aerial vehicle (drone) and related technical data to the People’s Republic of China.

Wency Man ran a family business with her husband that produced small electronic components used in cell phones and some radio devices. Around March 2011 she began trying to find jet fighter industry sources to help her find out what it would take to export a fighter jet to China. One of her “jet fighter industry source” contacts alerted federal authorities to Man and an undercover investigation was launched. Eventually Man began communicating with an undercover agent who said he worked for a fictitious company in Broward County; he told Man he could get her the following items on her list:

  • Pratt & Whitney F135-PW-100 engines used in the F-35 Joint Strike Fighter;
  • Pratt & Whitney F119-PW-100 turbofan engines used in the F-22 Raptor fighter jet;
  • General Electric F110-GE-132 engines designed for the F-16 fighter jet;
  • General Atomics MQ-9 Reaper/Predator B Unmanned Aerial Vehicle, capable of firing Hellfire Missiles; and
  • Technical data for each of these defense articles

Wency was trying to get all of the listed items sent to Xinsheng Zhang in China. Zhang works for the China military and the items would have been used by the government of China. Man explained to the undercover agent that Zhang was a “technology spy” and wanted stealth technology. The drone that he wanted was $50 million, and that didn’t include any of the fighter jets.

On June 9, 2016, Man was convicted of one count of conspiring to export and cause the export of defense articles without the required license, although it should be noted that this export would never have been approved by the US government. Man’s lawyer attempted to have the jury verdict thrown out based on the fact that, “It was our position that there was no conspiracy and that she was entrapped,” Alex Strassman (Man’s lawyer) said. “It was pretty clear what would have happened if the government would have left her alone. Nothing more would have happened.”

Fast forward a few months and Wency has been sentenced to 50 months in prison which proves that conspiring can be just as bad as following thru…even if there was almost zero percent chance of your plan actually becoming a reality.

Read More: https://www.justice.gov/opa/pr/california-woman-sentenced-50-months-prison-conspiring-illegally-export-fighter-jet-engines

Editor’s Note:  This story reminded me of the great song by Emerson, Lake and Palmer.  –JB

Wency Man

She had ITAR drones
And tech data by the score
All advanced technology
For export out the door

Ooooh, what a Wency Man she was
Ooooh, what a Wency Man she was

 

Hot section and stealth
They made up her bed
A technology spy
By which she was led

Ooooh, what a Wency Man she was

Ooooh, what a Wency Man she was

 

She procured technology
For her country and Peking
Of her honor and her glory
The people would sing

Ooooh, what a Wency Man she was

Ooooh, what a Wency Man she was

A conviction found her
“You’re guilty” the judge cried
No lawyer could save her
But she didn’t get fried
Ooooh, what a Wency Man she was
Ooooh, what a Wency Man she was

China Telecomm Giant ZTE Gets Another Temporary Reprieve from US Export Denial List

Tuesday, July 12th, 2016 by Danielle McClellan

By: John Black

The Commerce Department’s Bureau of Industry and Security (BIS) announced that it is extending the temporary general license for ZTE to effectively suspend ZTE’s denial list status until August 30, 2016.  BIS originally put ZTE on its Entity List on March 8, 2016, based on BIS’ allegations that ZTE, including its senior management, established a complex network as part of its efforts to illegally transfer US technology to Iran and other prohibited destinations.  The original denial prohibited all transfers from anywhere in the world of US origin items to ZTE as well as exports from outside the United States of non-US origin items with more than 25% US controlled content and certain foreign items produced directly from using US technology.  The original listing was clearly the biggest EAR penalty ever imposed in my 32 years in this field.

As previously reported in this newsletter, on March 24, 2016 BIS announced a general license that effectively temporarily suspended until June 30, 2016, the denial  against:

  • Zhongxing Telecommunications Equipment (ZTE) Corporation (also referred to as ZTEC)
  • ZTE Kangxun Telecommunications Ltd.

Now BIS has extended that general license for these two entities through August 31, 2016.  It is easy to infer from this that ZTE must have originally refused to cooperate with BIS regarding the diversions to prohibited destinations, but after being placed on the Entity List ZTE rounded up a hoard of Washingotn lawyers and came crawling on its knees to BIS promising to cooperate and take decisive remedial actions.  The extension indicates that ZTE is continuing to cooperate with BIS, at least as much as is necessary to get the suspension of its denial extended until the end of August.

These two ZTE entities remain on the EAR Entity List:

  • Beijing 8 Star International Co.
  • ZTE Parsian

For more information go to:  http://www.bis.doc.gov/index.php/regulations/federal-register-notices#fr41799

3 Men & Illegal Exports to Syria

Tuesday, July 12th, 2016 by Danielle McClellan

By: Danielle McClellan

In November 2012, three individuals and one company were indicted with charges of criminal conspiracy, wire fraud, illegal export of goods, money laundering, and false statements. Until now the indictment remained under seal pending the arrest of the defendants.

Between 2003 and 2012, d-Deri Contracting & Trading (owned by Ahmad Feras Diri of London) was exporting goods originally from the US from Global Parts Supply (owned by Harold Rinko of Hallstead, PA) to his brother and business partner Moawea Deri who was located in Syria.  The goods purchased from Rinko’s US company were done so based on false invoices, undervalued and mislabeled goods.  Then the purchased goods were exported by falsely listing their identity and final geographic location on all documentation. The items would be shipped from the US to Jordan, the UAE, and the UK, and finally transshipped to Syria.

The items exported allegedly included:

  • a portable gas scanner used for detection of chemical warfare agents by civil defense, military, police and border control agencies;
  • a handheld instrument for field detection and classification of chemical warfare agents and toxic industrial chemicals;
  • a laboratory source for detection of chemical warfare agents and toxic industrial chemicals in research, public safety and industrial environments;
  • a rubber mask for civil defense against chemicals and gases;
  • a meter used to measure chemicals and their composition;
  • flowmeters for measuring gas streams;
  • a stirrer for mixing and testing liquid chemical compounds;
  • industrial engines for use in oil and gas field operations and a device used to accurately locate buried pipelines

Note: Nearly all exports to Syria will be denied, other than a few items categorized under humanitarian food and medicine. The goal of the embargo on Syria is to shut down the supply chain used by the Syrian state to support terrorism and create proliferate weapons of mass destruction, and in this specific case, chemical weapons.

Fast forward to this month, Ahmad Feras Diri (age 43) of London has plead guilty to conspiracy to illegally export items used to detect chemical warfare agents to Syria. He lost his extradition fight in the UK in November 2015 at which point he was brought to the US to face the charges. Diri admitted that he conspired to export items from the US through third party countries to customers in Syria without obtaining the required US Commerce Department licenses.

Harold Rinko (age 73 of Hallstead, PA) was indicted by a grand jury in November 2012 and admitted in court that he conspired to export the items from the US through third party countries to customers in Syria without an export license.

Moawea Deri remains at large and is considered a fugitive but will likely remain in Syria as extradition is unlikely to occur.

“This extradition demonstrates HSI’s commitment to use all its resources to prevent sensitive and restricted technology from being exported to Syria through the black market,” said HSI Philadelphia Special Agent in Charge John Kelleghan. “No good comes of illegal exports to Syria, especially during this time of gross misgovernment and civil strife. As the principal enforcer of export controls, HSI will continue to do everything in its power to ensure that sensitive technology doesn’t fall into the wrong hands in Syria. I applaud our colleagues at the Department of Commerce, the U.S. Attorney’s Office for the Middle District of Pennsylvania, along with our law enforcement counterparts in the United Kingdom. This coordinated effort helped us make this complex investigation a success.”

More Information: https://www.ice.gov/news/releases/uk-resident-connected-syrian-export-scheme-extradited-us-face-federal-charges

Successful Violations for Dummies: Don’t Fly to the US when Attempting to Arrange Illegal Exports

Friday, May 27th, 2016 by Danielle McClellan

New Zealand Man Arrested in Seattle After Contacting Undercover Agent

By: Danielle McClellan

William Ali, a New Zealand man has been indicted in Seattle on federal charges that he attempted to purchase aircraft parts in the US that he planned to sell to a client in China. Last year Ali contacted a US company looking for “aircraft parts called accelerometers.” These parts are developed for low or zero gravity navigation systems used in spacecraft and aircraft and any one selling the items must have an export license (Ali did not).

A Homeland Security agent began to investigate Ali shortly after he contacted the company looking to purchase the accelerometers. The agent and Ali exchanged emails and Ali admitted that he knew there were controls on the sale of the items that he was looking to buy and that trying to buy them was turning out to be difficult. He also explained that he didn’t think he could get an export license for the parts so he was trying to purchase them through different sources. His client was looking for a “huge quantity” of the product because they were “manufacturing a variant of the MA60 aircraft and needed high-quality US parts” according to the criminal complaint.

After considering all of his options, Ali flew to Seattle to pick up the pars where he was arrested when he arrived on April 11, 2016.

More Details: http://www.seattletimes.com/seattle-news/crime/new-zealand-man-faces-illegal-export-charges-in-seattle/

Export Business Manager Pleads Guilty to Attempted Illegal Exports to Iran

Friday, May 27th, 2016 by Danielle McClellan

By: Danielle McClellan

Asim Fareed (age 51) of North Brunswick, NJ operated an export business in Somerset, NJ that agreed to ship items purchased by customers in Iran. Fareed provided false documentation to the US Department of Commerce for export purposes between 2013 and 2015. He created invoices that contained false information related to the identity and geographic location of the purchasers of the goods. The items were supposed to be shipped from the US to the UAE and then onto Iran. The items never were actually shipped.

Asim Fareed agreed to enter a plea to conspiracy to provide false statements in connection to the illegal export of goods to Iran. “The Office of Export Enforcement vigorously pursues violators of our nation’s export control laws, which are in place to further and protect our national security and foreign policy.  As in this instance, we work closely with our colleagues at HSI and other law enforcement agencies in prosecuting this case,” said Jonathan Carson, Special Agent in Charge, U.S. Department of Commerce, Bureau of Industry and Security, Office of Export Enforcement, New York Field Office.
“This case demonstrates how far individuals will go to circumvent U.S. export laws to export goods to countries like the Islamic Republic of Iran,” said Angel M. Melendez, special agent in charge of HSI in New York. “The Iran Trade Embargo prohibits Americans from supplying goods, technology and services to Iran directly or indirectly. HSI is committed to aggressively pursuing those who conduct illegal business with Iran.”
The case was investigated by the Department of Commerce, Office of Export Enforcement and U.S. Immigration and Custom Enforcement’s (ICE), Homeland Security Investigations (HSI).  Assistant U.S. Attorney Todd K. Hinkley is prosecuting the case.
More information: https://www.justice.gov/usao-mdpa/pr/new-jersey-man-charged-conspiracy-provide-false-statements-related-export-prohibited

DDTC Agreements Guidelines Updates

Thursday, May 5th, 2016 by Danielle McClellan

Revision 4.3 of the Guidelines for Preparing Agreements has been posted on the DDTC website. Download the document at http://pmddtc.state.gov/licensing/documents/AG_Rev%204.3.pdf.