On January 10, 2009, William Chai-Wai Tsu, vice president of Cheerway, Inc., was arrested on charges of illegally exporting "miniscule" integrated circuits (which have potential use in sophisticated communications and military radar systems) in violation of the International Emergency Economic Powers Act (IEEPA). Tsu, a resident of Beijing and a naturalized U.S. citizen, made his initial court appearance on Monday following his arrest, where his formal arraignment was scheduled for February 2, 2008.

The court documents allege that Tsu purchased the ICs from a San Jose-based distributor. Tsu allegedly told the distributor that the ICs would not be exported from the U.S. The Department of Justice states that Tsu's arrest was a result of investigation initiated by the agents of DOC and the Federal Bureau of Investigation (FBI), who opened the probe after receiving a lead on Tsu's activities from their local counterparts in San Jose, California. The DOJ stated:

This case is the product of an investigation by the recently created Export and Anti-proliferation Global Law Enforcement (EAGLE) Task Force. The counter-proliferation task force was recently created by the United States Attorney's Office for the Central District of California in conjunction with federal law enforcement agencies to jointly investigate and combat the illegal exports of arms and sensitive technologies. Members of the EAGLE Task Force include the U.S. Department of Commerce, Bureau of Industry and Security, Office of Export and Enforcement; ICE; the FBI; U.S. Customs and Border Protection; the Diplomatic Security Service and the Transportation Security Administration.

If convicted, Tsu faces up to 20 years in prison.

 

On January 6, 2009, the Bureau of Industry and Security (BIS) published a notice in the Federal Register requesting public comments on the appropriate extent and scope of U.S. export controls on foreign products that are the direct products of U.S.-origin encryption technology or software. BIS is seeking information on the potential impact of controlling such foreign made items for Encryption Items (EI) reasons under the Export Administration Regulations (EAR) (i.e., those items classified under ECCN 5A002 or 5D002).

Specifically, BIS is requesting comments regarding the impact this control would have on both U.S. exporters of encryption technology/software and foreign manufacturers of products that are derived in whole or in part from U.S.-origin encryption technology or software.

Comments must be received by BIS no later than March 9, 2009.

On January 30, 2009, the Directorate of Defense Trade Controls (DDTC) published updated agreement guidance documents to its website. A summary of the updates was also published.

 

On January 2, 2009, CBP published increased AES penalty guidelines effective February 1, 2009, for enforcing recent Census Bureau rules requiring exporters and forwarders to electronically file export declarations before cargo is loaded for transport. 

The regulation requiring use of AES of the web-based AESDirect went into effect on July 2, 2008, enforcement began on September 30, 2008, but penalty assessment was postponed. The new rules increase the maximum fine for failure to file, for late or incomplete filing or for submitting false information to $10,000 per violation. 

CBP stated that first time violators are likely to receive a warning or informational letter reminding the company of the new rules. Penalty ranges can be lower based on mitigating factors such as, inter alia, self-disclosure.

On January 26, 2009, the U.S. Supreme Court issued its opinion in  U.S. v. Eurodif S.A., et al. and USEC Inc., et al. v. Eurodif S.A. et al., its first antidumping case. Petitioners, who run the only uranium enrichment facility in the U.S., alleged that low enriched uranium (LEU) imported from European countries was being sold in the U.S. at less than fair value and was materially harming domestic industry. Petitioners sought relief under the Tariff Act of 1930, 19 U.S.C. §1673, which provides for antidumping duties on "foreign merchandise" sold in this country at "less than its fair value." 19 U.S.C. §1673 only applies to sales of goods and not to international sales of services.

The LEU at issue was being imported into the U.S. through one of two types of contracts. Under the enriched uranium product (EUP) contract, the enrichment utility simply paid the enricher cash for LEU of a desired quantity and concentration of the uranium. Under the separative work unit (SWU) contract, the utility provided a quantity of feed uranium and paid the enricher for the amount of energy required to enrich a quantity of uranium to a given concentration. The amount of energy required to enrich the uranium is measured in separative work units (SWUs).

On certiorari and applying the Chevron deference, the Court stated that the Commerce Department's interpretation of the §1673 application governed "in the absence of unambiguous statutory language to the contrary or an unreasonable resolution of ambiguous language." The Court held that the Commerce Department's interpretation that §1673 was not limited to cash-only sales was reasonable.

The Court pointed out that if §1673 only applied to cash sales, the application of the section could easily be avoided by a contractually stating part of the purchase price in terms of a commodity. The Court agreed with the Commerce Department that "legal fiction" created by the SWU contracts calling the purchases of uranium as "sale of enrichment services" could not control because, in essence, the SWU contracts were equivalent to EUP contracts, and, therefore, sales of goods. Similarly, if SWU contracts were exempted from §1673, any EUP contract could be transformed into a SWU contract by splitting the uranium purchase transaction in two, where one contract was to purchase the uranium and the second to enrich the uranium. Then, the Court reasoned, the "antidumping duties would primarily chastise the uncreative" as "contracts for imported pasta would be replaced by separate contracts for what and what processing services, [and] sweater imports would give way to separate contracts for wool and knitting services." Thus, the Commerce Department's interpretation of §1673 to foreclose such results by treating the enrichment services as goods was reasonable.  

 

On January 21, 2009, President Obama issued a Freedom of Information Act (FOIA) memorandum instructing the federal government to operate under the principles of openness and transparency.

The memo instructs all agencies to act promptly and openly when responding to requests for information under FOIA. Furthermore, the memo states that agencies should adopt a presumption in favor of disclosure, meaning that agencies should take affirmative steps to make the information public in a timely manner and not wait for specific requests from the public.

In the past, FOIA requests have been perceived by companies as virtually useless because it took so long for the government to process and the information received was so redacted that it was meaningless.  Therefore, a FOIA request may now provide a useful tool for importers and exporters in the collection of information.  CBP may now be willing to provide relevant background information regarding rulings and penalties.

In a separate memo regarding government transparency, President Obama instructed the heads of the Office of Management and Budget (OMB) and the General Services Administration to issue an Open Government Directive implementing the principles of government's transparency, public participation, and collaboration, within 120 days.