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The Justice Department has rapidly stepped up criminal enforcement of export control violations as part of its focus on the prosecution of national security crimes. Attorneys who represent exporters, as well as the exporters themselves, need to be aware of the rapidly changing climate. Naturally, Washington is the hub for export enforcement actions, since it is home to the key U.S. government agencies charged with the administration and enforcement of export controls. It is also the home of the Criminal Division of the Justice Department, which is responsible for policies governing the prosecution of national security crimes, including export control violations. Moreover, the U.S. Attorney’s Office for the District, through its Transnational and Major Crimes Section, has prosecuted many high-profile export control cases. The stepped-up focus on national security is transforming the once-sleepy world of export controls. Not long ago, prosecutors were reluctant to plunge into the esoteric area of export controls. Today, prosecutors around the country want to get a piece of the action. Cases with a national security angle have prestige. They draw attention. They result in high penalties and jail time. SHIPPING BUBONIC PLAGUE For instance, many in the exporting community view Thomas Butler’s case as a prime example of today’s tough enforcement climate. The case started when Butler, a professor at Texas Tech University, reported that 30 vials of potentially deadly bubonic plague were missing and presumed stolen from his university laboratory. As the facts unfolded, it turned out that Butler had shipped samples of the plague bacteria to Tanzania in connection with medical research. Butler, a highly regarded authority on infectious diseases, put the bacteria into a FedEx package and sent it to a medical center in Tanzania without obtaining the required export license. While it may be difficult for us to fathom how someone could be so careless as to put deadly bacteria into a FedEx package, casual treatment of deadly bacteria was apparently common in the academic community. In fact, many see the academic community as particularly resistant to much government control over its scientific research. Many in the scientific community rushed to Butler’s defense when the Justice Department decided to prosecute him. This was to no avail. The case went to trial, and in March 2004, Butler was sentenced to two years in prison and fined $300,000. The Butler case clearly sent a strong message about how the government is cracking down on the control of chemical and biological agents. From the government’s perspective, loose handling of such agents may create a national security crisis. The anthrax scare, in which deadly agents were sent through the mail, created terror throughout the country, and especially in Washington, D.C. The Justice Department used the Butler case to deliver a strong message that tight controls on deadly chemical and biological agents would be strictly enforced. In the business community, the biggest export control risks often arise in the context of technology transfers to foreign nationals within the United States. “Technology” is a broad concept in the world of U.S. exports controls, and can cover virtually any information related to the design, manufacture, or use of the product. The information can include technical specifications, engineering drawings, or manuals. Transfer of technology can occur in a number of ways, including oral or electronic communications, sharing of computer databases, and visual inspection. Recently, the government has increased its focus on the enforcement of the so-called deemed export rule. Under this rule, the transfer of technology to a foreign national in the United States requires an export license if a license would be required to export such technology to the recipient’s home country. While the deemed export rule has long been on the books, the current aggressive enforcement of the rule caught many companies by surprise. In the leading deemed export case, a California company had set up a joint venture, called Suntek Microwave Inc., with a Chinese government-owned entity. The California company transferred technology relating to the manufacturing process for detector log video amplifiers to Chinese nationals who worked at Suntek in the United States. The amplifiers, which potentially could be used in missile and radar communications and related technology, are controlled for national security reasons and require a license for export to China. In the Suntek case, the Justice Department obtained the first-ever criminal conviction for the transfer of controlled technology to foreign nationals in the United States. The Justice Department also prosecuted Suntek for unlicensed exports of the amplifiers from the United States to China. The 2004 settlement of all charges included a $339,000 criminal fine and administrative penalties, including fines and a 20-year denial of export privileges. Suntek’s former president pleaded guilty and is awaiting sentencing. The Suntek case shows that the government is willing to criminally prosecute unlicensed technology transfers to foreign nationals. These deemed export cases are difficult for the government to prove — it’s much easier to show that a physical item was exported than it is to show that information was given to a foreign national in the United States. While the Suntek case involved an egregious situation, the same law applies, for example, to a defense contractor giving a foreign customer a factory tour. Because of this case, many companies are tightening up their internal controls. LATEST TWIST The deemed export rule continues to be a rapidly expanding tool for enforcement. As the latest twist in this area, the Commerce Department has asked for comment on a proposed regulation that could curtail the ability of foreign researchers to participate in cutting-edge research. U.S. universities have broadly relied on the so-called fundamental research exemption from the reach of U.S. export controls to conduct much of their research. Some in the government, however, are pushing for the “clarification” of current rules to ensure that American universities do not escape deemed export controls in the context of fundamental research. For instance, the use of sophisticated equipment by foreign nationals conducting research at U.S. universities may be subject to export licensing requirements if such use is accompanied by the transmittal of information that falls within the broad definition of technology under U.S. export controls. The proposed regulations could have profound consequences on U.S. competitiveness. The proposal has been sharply criticized because it could limit the pool of foreign nationals available to work on the latest research in science and technology, areas in which the United States relies heavily on foreign scientists and professionals. TRADE WITH EMBARGOED COUNTRIES U.S. trade and economic sanctions laws are also included in the wave of stepped-up enforcement. As the United States becomes increasingly concerned with the Iranian nuclear program, Justice Department resources are being used to enforce the U.S. embargo against Iran. Despite the long-standing embargo, those visiting Iran report that it is full of what appear to be U.S. goods. The question is how they got there in the first place. In an effort to crack down on this trade, the Justice Department has targeted American companies that sell to Iran by shipping through third countries. In December 2004, the Ebara International Corp. of Reno, Nev., pleaded guilty to multiple criminal charges stemming from unlawful exports of cryogenic fluid pumps to a natural gas facility in Iran. Ebara sent the pumps to Iran via France in an attempt to evade the U.S. embargo. In a settlement of criminal charges, Ebara agreed to a $6.3 million criminal fine and three years’ probation. Ebara’s former CEO pleaded guilty to a separate charge of conspiracy to make false statements to investigators and agreed to a $10,000 fine and three years’ probation. The Commerce Department also pursued administrative charges against both the company and its former CEO. In another sanctions case, Interaero Inc., a California supplier of aircraft parts, agreed in 2004 to pay a $500,000 criminal fine to settle charges stemming from unlawful exports of military aircraft parts and missile components to China. The company knew the items were destined for Iran. U.S. exports of military items to both China and Iran are prohibited. While the Justice Department has always enforced the embargo against Iran, it appears that it is putting increasing resources into the enforcement effort. With intense political pressure to enforce U.S. export controls, illegal trade with Iran is likely to remain high on the Justice Department’s radar screen. In the current environment, the Justice Department views export control violations as serious national security crimes. U.S. exporters (including those employing foreign nationals working with controlled technology in the United States) need to ensure they have adequate compliance systems in place. Lawyers representing exporters and defending export control cases should prepare their clients for vigilant enforcement. F. Amanda DeBusk, the former Commerce Department assistant secretary for export enforcement, is a partner at Miller & Chevalier and can be reached at [email protected]. Sylwia Lis ([email protected]) is an associate at the same firm. Both specialize in export controls.

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