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Greetings!
We hope you all had a happy new year!
This month's import/export news highlights include: a $15M record export fine by a U.K. firm; the White House launches a National Export Initiative; an ex-Boeing engineer is sentenced to 15 year imprisonment for economic espionage; a proposed change to a H1B visa application form indicates that a deemed export license needs to be obtained prior to applying for a visa; BIS updates EMCP guidelines; the U.S. Court of Appeals dismisses the Totes-Isotoner tariff equal protection claim; and a Customs broker is sentenced to 24 years imprisonment for fraud. As always, we would appreciate any comments or suggestions you may have to improve this newsletter either by email or via our feedback survey link in our left column.Thank you for reading! Jennifer Kessinger & Tammie Goldstein Krauskopf
globaltradeexpertise
info@globaltradeexpertise.com
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U.S. Seeks Extradition of Iranian Engineer Who Purchased Sensitive Items Online
Items shipped to Malaysia were re-routed to Iranian
military entities
 The Associated Press reported that on February 17, 2010, a French court postponed a decision on whether to extradite an Iranian Engineer to the U.S., where he is accused of exporting goods to an embargoed country, money laundering, smuggling goods, and other charges. Majid Kakavand (Kakavand) was arrested in Paris on March 20, 2009 and held in prison until August 26, 2009, until his release on condition that he stays in Paris.
U.S. government claims that Kakavand went online to purchase U.S. electronics, including capacitors, inductors, resistors, sensors and connectors, and had them shipped to Malaysia, from where they were forwarded to two Iranian military entities.
The French court must decide whether Kakavand is to be extradited based on whether his actions were illegal in France as well as the United States. U.S. government claims that Kakavand needed export licenses to send the items to Iran. Kakavand's attorneys argue that he did not violate French or European Union laws which have no general trade embargo on Iran like the U.S, and that documents in all sales transactions were stamped NLR, for "No License Required."
The main argument in this case is whether items that Kakavand purchased have sensitive defense uses. The accused firefengineer contends that the electronics that he bought online are ordinary and commonplace; however, the U.S. in its extradition request argue that many items at issue meet military standards.
In February's hearing, the judge handling the case asked for additional information on the matter, including France's military armament body studies, before making the extradition decision. The new hearing has been set for March 31, 2010.
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UK Firm Pleads Guilty to Exporting Boeing 747 Aircraft to Iran
Firm Agrees to Pay Largest Export Fine Ever - $15 Million
 On February 5, 2010, the Department of Justice (DOJ) announced that Balli Aviation Ltd., a subsidiary of United Kingdom-based Balli Group PLC, pleaded guilty in the U.S. District Court for the District of Columbia to a two-count criminal information in connection with its illegal export of commercial Boeing 747 aircraft from the United States to Iran. (BIS' press release can be found here.)
The DOJ announced:
Under the plea agreement, Balli Aviation Ltd. agreed to pay a $2 million criminal fine and be placed on corporate probation for five years. The $2 million fine, combined with a related $15 million civil settlement among Balli Group PLC, Balli Aviation Ltd., the U.S. Department of Commerce's Bureau of Industry and Security (BIS), and the U.S. Department of the Treasury's Office of Foreign Assets Control (OFAC), that was also announced today, represents one of the largest fines for an export violation in BIS history.
Under the terms of the related civil settlement, Balli Group PLC and Balli Aviation Ltd. have agreed to pay a civil penalty of $15 million of which $2 million will be suspended if there are no further export control violations. In addition, Balli Aviation Ltd. and Balli Group PLC are denied export privileges for five years, although this penalty will be suspended provided that neither Balli Aviation nor Balli Group commits any export violations and pays the civil penalty. Under the terms of the settlement, Balli Group PLC and Balli Aviation, Ltd. will also have to submit the results of an independent audit of its export compliance program to BIS and OFAC for each of the next five years.
According to count one of the information filed with the court, beginning in at least October 2005, through October 2008, Balli Aviation Ltd. conspired to export three Boeing 747 aircraft from the United States to Iran without first having obtained the required export license from BIS or authorization from OFAC, in violation of the Export Administration Regulations (EAR) and the Iranian Transactions Regulations. More particularly, the information states that Balli Aviation Ltd., through its subsidiaries, the Blue Sky Companies, purchased U.S.-origin aircraft with financing obtained from an Iranian airline and caused these aircraft to be exported to Iran without obtaining the required U.S. government licenses. Further, Balli Aviation Ltd. entered into lease arrangements that permitted the Iranian airline to use the U.S.-origin aircraft for flights in and out of Iran.
Count two of the information states that Balli Aviation Ltd. violated a Temporary Denial Order (TDO) issued by BIS on March 17, 2008, that prohibited the company from conducting any transaction involving any item subject to the EAR. Starting in or about March 2008 and continuing through about August 2008, Balli Aviation Ltd. willfully violated the TDO by carrying on negotiations with others concerning buying, receiving, using, selling and delivering U.S.-origin aircraft which went to the Export Administration Regulations.
"Today's case should serve as further warning of Iran's continued efforts to circumvent sanctions and obtain U.S. technology. Together with our colleagues from the Justice and Commerce departments, OFAC will continue to aggressively pursue both domestic and foreign entities that seek to violate U.S. sanctions programs by exporting goods to Iran from the United States." said Adam J. Szubin, Director, Office of Foreign Assets Control.
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White House Launches National
Export Initiative
Inter-agency collaboration seeks to double U.S.
exports
 On February 4, 2010, U.S. Commerce Secretary Gary Locke (Locke) announced the details of President Obama's National Export Initiative (NEI) that seeks to double U.S. exports to $3 trillion within then next 5 years. The new export levels are expected to support 2 million U.S. jobs.
According to Locke's entry on the White House blog, NEI seeks primarily to expand U.S. government's export promotion efforts, increase government's focus on eliminating obstacles that prevent U.S. exporters from getting open and fair access to foreign access, and improve access to credit, especially for small- and medium-sized businesses that would like to become exporters.
To increase exports, the Commerce Department and several other federal agencies will collaborate in combining trade advocacy with export control reform. According to Locke, the White House is asking Congress to increase trade promotion funding by apportioning an additional $70 million for the International Trade Administration (ITA) and $50 million for the Department of Agriculture in the 2011 budget.
ITA plans to hire an additional 300 trade exports to promote U.S. companies overseas and assist a client base of more that 23,000 to begin or increase their exports in 2011.
As part of the initiative, the Export-Import Bank will increase financing available to small businesses by $2 billion to $6 billion over the next year. Over the past three months, the bank authorized $1 billion in small business loans to increase exports.
NEI will also focus on existing trade laws, including enforcement of intellectual property rights.
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Ex-Boeing Engineer Sentenced for Stealing Aerospace Secrets for China
First U.S. Trial on Economic Espionage Charges
The Wall Street Journal reported that on February 8, 2010, Dongfan "Greg" Chung, a Chinese-born former Boeing engineer was sentenced to 15 years and 8 months in prison for acquiring sensitive U.S. space shuttle information and other documents for China.
The case against Chung was the first U.S. trial on economic espionage charges. The government charged that Chung began spying for the Chinese in the late 1970s, after he became a naturalized U.S. citizen and was hired by Rockwell International, where he worked until it was acquired by Boeing in 1996. Chung stayed with Boeing until he was laid off in 2002, but a year later he was brought back as a consultant. Boeing fired Chung when FBI began its investigation in 2006.
The government accused Chung, a stress analyst with high-level clearance, of stealing documents related to aerospace technology development while working for Rockwell and Boeing. When FBI agents searched Chung's house in 2006, they found more than 300,000 pages of documents on Boeing-developed aerospace and defense technologies. Specifically, the technologies involved an antenna developed for radar and communications on the U.S. shuttle and a fueling mechanism for a booster rocket used to launch manned space vehicles.
During trial, Chung claimed that he had brought the documents home to write a book. Chung's lawyers argued that he may have violated Boeing policy by bringing the papers home, but he did not break any laws by doing so, and U.S. government could not prove that he had given away any sensitive information to China.
Assistant U.S. Attorney noted in sentencing papers that Chung acquired a personal wealth of more than $3 million during his cooperation with China.
Chung's activities were discovered while investigating Chi Mak, another suspected Chinese spy living in Southern California. In 2007, Mak was convicted of conspiracy to export U.S. defense technology to China and sentenced to 24 years in prison.
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Proposed Revision Requires Employers to Obtain BIS Deemed Export License before Filing for H-1B
Comments on proposed changes are due by April 9, 2010.
On February 8, 2010, the Department of Homeland Security, U.S. Citizenship and Immigration Services (USCIS) issued a notice requesting comments on the proposed changes of Form I-129, Petition for a Nonimmigrant Worker. If revised, Form I-129, used to apply for H-1B visas for skilled technical workers, will require employers to obtaine a deemed export license from the Bureau of Industry and Security (BIS) before applying for the H-1B visa itself. Before, an employer could file for H-1B visa and the deemed export licensed simultaneously.
As provided by the instructions to Form I-129 on p. 4, if a deemed export license is required, "the petitioner must submit evidence that a review of the deemed export license requirements has been completed, as set forth by Title 15, Code of Federal Regulations (CFR), Export Administration Regulations (EAR) Part 734.2 the Deemed Export Rule as regulated by the U.S. Department of Commerce."
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Export Agencies Update Online Guidance
Guidance for EMCP and Commodity Jurisdictions Updated
On February 17, 2010, the Directorate of Defense Trade Controls (DDTC) announced that until further notice and effective immediately: "All CJ requests must be mailed (FedEx, DRL, UPS, USPS, etc.) to DDTC. Requests must include eight complete copies of a fully executed DS-4076 CJ Form and all supporting documentation. This statement is to temporarily update the CJ Guidelines included below."
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U.S. Court of Appeals Dismisses
Totes-Isotoner Equal Protection Claim
Differing tariff rates based on the gender of users held not to violate Equal Protection Claim
 On February 5, 2010, the U.S. Court of Appeals for the Federal Circuit (CAFC) issued its decision in Totes-Isotoner Corporation v. United States, upholding the U.S. Court of International Trade (CIT) decision to dismiss the complaint for failure to state a claim.
Totes-Isotoner (Totes) appealed from a judgment of the CIT dismissing its complaint against the U.S. for failure to state a claim. Totes alleged that the Harmonized Tariff Schedule of the United States (HTSUS), by imposing different rates of duty on leather gloves "for men" and leather gloves "for other persons," unconstitutionally denies the equal protection of the laws.
CAFC upheld the CIT's judgment that (1) it had jurisdiction under 28 U.S.C. ยง1581(i); (2) Totes had standing to bring its claims; and (3) Totes' equal protection claims were justiciable. On the merits, CAFC affirmed CIT's decisions that Totes has failed to establish an equal protection claim due to its failure to plead facts sufficient to allege a claim of unconstitutional discrimination.
Specifically, Totes argued that the tariff provisions at issue unconstitutionally discriminate based on the sex of users of gloves. CAFC noted that because tariff rates applicable to different product classifications under the HTS are "the result of multilateral international trade negotiations and reflect reciprocal trade concessions and particularized trade preferences," and that reasons behind different tariff rates depend on several factors, including country of origin, the type of product, the circumstances under which the products are imported, and the state of the domestic manufacturing industry. As a result, the Court reasoned that it was quite possible that the different tariff rates for men's and other gloves reflected the fact that the gloves are different products the rates of which may be the result of trade concessions made by the U.S. in return for unrelated trade concessions. Accordingly, to prove an equal protection claim, Totes would have to establish that, "Congress intended to discriminate against men in the tariff schedules." Absent such showing, CAFC refused to find discrimination based on disparate impact on purchasers alone.
In a concurring opinion, Judge Prost held that the proper reason to dismiss Totes' claim was that the tariff classification was not facially discriminatory, pointing out that tariff rates at issue only imposed a burden on importers, and not on gender- or age-based categories of people. Absent a showing of disparate impact on consumers based on their sex, Justice Prost concluded that Totes' failed to establish their equal protection claim.
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Customs Broker Sentenced in a Fraud Scheme
Broker Sentenced to 24 Months Imprisonment
On February 18, 2010, the U.S. Department of Justice (DOJ) announced the sentencing of a Long Island customs broker who defrauded a Massachusetts medical equipment distributor out of $1.2 million.
Gregory Manuelian (Manuelian) of Manhasset, N.Y, was sentenced to 24 months in prison, followed by 3 years of supervised release and ordered to pay almost $1.2 million in restitution based on charges that he defrauded his client, B-K Medical Systems, by repeatedly submitting falsified customs documents indicating that B-K owed customs duties on goods that were actually duty-free.
Manuelian operated Marquis Clearance, Ltd., a customs brokerage in Jamaica, N.Y. and served as B-K's customs broker since 1980. On B-K's goods entering the U.S., Manuelian ordinarily paid the duties and then faxed the invoices to the client. B-K reimbursed Manuelian for the duties and paid him a brokerage fee. In 1996, the U.S. Department of Commerce began to phase out the duties on the types of goods imported by B-K; by 1999, the imports of the goods imported by B-K were duty free.
Throughout the duty phase-out program and when the imports became duty-free, Manuelian continued to bill its client for supposedly pre-paid duties on the equipment. To support the claims, Manuelian mailed its client falsified customs forms which showed a duty owed on the imported equipment, usually set at 5.3% of the equipment's value. By the time B-K discovered its loss in 2006, Manuelian had defrauded it out of approximately $1.2 million.
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Who's Hiring?
A Summary of Current Trade Job Opportunities
 As a service to the international trade community, Global Trade Expertise compiles links to trade job opportunities from many different sources. New trade job listings are posted frequently on our website.
To sort the job opportunities by region, fields, or levels, click on the appropriate category or tag in the right column on our Trade Jobs webpage. |
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Calendar of Events
Upcoming Trade Events & Seminars
 Our website has a comprehensive listing of import and export conferences held throughout the country, as well as Customs training, EAR training, ITAR training, and other training. Below is a small sampling of what's available in the coming months:
Complying with U.S. Export Controls - Bureau of Industry and Security
March
9 - 10, 2010 - Chicago, IL - $450
How To Develop an Export
Management and Compliance Program - Bureau of Industry and Security
March
11, 2009 - Chicago, IL - $250
Basic ITAR Workshop - Federal Publications Seminar
March 11, 2010 - Arlington, VA - $595
ICPA Annual Conference - "Discovering the Treasures of Compliance" - International Compliance Professionals Association
March 14 - 18, 2010 - Orlando, FL - $600/$795
Complying with U.S. Export Controls - Bureau of Industry and Security
March 18 - 19, 2010 - Del Mar, CA - $450
U.S. Export Controls Seminar - Export Compliance Training Institute
March 22 - 25, 2010 - Houston, TX - $1050
Defense Trade Controls Seminar - Export Compliance Training Institute
March 24 - 25, 2010 - Houston, TX - $1050
Advanced ITAR Workshop - Federal Publications Seminar
March 25 - 26, 2010 - San Diego, CA - $995
Complying with U.S. Export Controls - Bureau of Industry and Security
April 7 - 8, 2010 - Denver, CO - $450
Advanced ITAR Workshop - Federal Publications Seminar
April 15 - 16, 2010 - Denver, CO - $995
U.S. Export Controls Seminar - Export Compliance Training Institute
April 19 - 20, 2010 - Denver, CO - $1050
Complying with the ITAR - Directorate of Defense Trade Controls (DDTC)
April 22, 2010 - Portsmouth, NH - $200
Complying with U.S. Export Controls - Bureau of Industry and Security
April 22, 2010 - Santa Clara, CA - $380
Complying with U.S. Export Controls - Bureau of Industry and Security
April 20-21, 2010 - Portsmouth, NH - $325
Complying with the ITAR - Directorate of Defense Trade Controls (DDTC)
April 22, 2010 - Portsmouth, NH - $200
2010 Spring Conference - Society for International Affairs
April 26 - 27, 2010 - Las Vegas, NV - $700-800
ITAR Compliance and Audits - Federal Publications Seminar
April 28 - 29, 2010 - Huntsville, AL - $995
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Thanks again for your interest in our newsletter!
Sincerely,
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Jennifer Kessinger & Tammie Krauskopf
Attorneys & Consultants
jk@globaltradeexpertise.com
Tel. 925.876.1381 (Jennifer Kessinger)
tk@globaltradeexpertise.com
Tel. 708.707.4087 (Tammie Krauskopf)
www.globaltradeexpertise.com
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