Originally published in the Export, Customs & Trade Sentinel, Volume II, Number 4, Fall 2005

The U.S. Department of Commerce, Bureau of Industry of Security ("BIS"), announced on July 28, 2005 that the Chattanooga Group Inc. ("CGI"), a division of Encore Medical Corporation based in Hixson, Tennessee, will pay a $101,000 civil penalty to settle administrative charges that it committed 13 violations of the Export Administration Regulations ("EAR") in connection with unauthorized exports of physical therapy equipment from the United States to Iran via Australia without the required export licenses. With certain limited exceptions, under the International Emergency Economic Powers Act, the EAR and the Department of the Treasury’s Iranian Transaction Regulations, all exports to Iran of U.S.-origin commodities require an export license from the Department of the Treasury’s Office of Foreign Assets Control ("OFAC"). It is also unlawful to ship U.S.-origin products to a third country for shipment to Iran without the necessary authorization from OFAC.

Asher Karni, a South African national, was sentenced to 36 months in prison on August 4, 2005 by a Washington, D.C. federal court after pleading guilty to illegally exporting restricted electronic items that can be used in nuclear weapons and missile systems. Karni admitted that in March 2003 he obtained a Tektronix oscilloscope from an unnamed company in Plainview, N.Y., and had the company send it to South Africa. When the shipment arrived at Top-Cape, Karni forwarded it to Pakistan. Karni did not obtain the requisite export license before shipping the item from the United States.

BIS announced on August 8, 2005 that Erik Kyriacou, of New York, N.Y., was sentenced to five years’ probation and was ordered to pay $8,000 in restitution in connection with the export of night vision equipment for delivery to Iran without the required U.S. Government authorization. Kyriacou pleaded guilty to two counts of violating the International Emergency Economic Powers Act, one count of interstate transportation of stolen property, and one count of making a false statement in export documents. According to court documents, in January 2004, Kyriacou unlawfully attempted to export four Astroscope camera lenses from the United States with knowledge that the lenses were to be shipped to Iran, which is currently under a U.S. embargo. Kyriacou also attempted to sell the lenses on the Internet to undercover agents posing as international arms brokers. The Astroscope is a third-generation night vision device that allows a video camera to capture images clearly in the dark.

On August 8, 2005, BIS announced that H. D. Sheldon & Company Inc., of New York, N. Y., agreed to pay a $13,500 civil penalty to settle allegations that it violated the antiboycott provisions of the EAR. The antiboycott provisions prohibit U.S. persons from complying with certain requirements of unsanctioned foreign boycotts, including furnishing information about business relationships with or in Israel. In addition, the EAR requires that U.S. persons report their receipt of certain boycott requests to the Department of Commerce. BIS alleged that, on two occasions in connection with transactions involving the sale and transfer of goods from the United States to Bahrain and Qatar, Sheldon furnished prohibited information about another company’s business relationships with Israel in violation of the anti-boycott provisions. BIS also alleged that, on five occasions, Sheldon failed to report in a timely manner its receipts of requests from Dubai to provide such certification.

Carlos Gamarra-Murillo, 53, of Sorroco, Colombia, was sentenced to 25 years in prison on August 8, 2005 by a Florida federal court for attempting to illegally purchase and export numerous fi rearms and other weapons destined for a Colombian terrorist organization. The sentence follows Gamarra-Murillo’s February 11 guilty plea to charges of brokering and exporting defense articles without a license and providing material support to a foreign terrorist organization. According to the charges, Gamarra-Murillo met with a confidential U.S. government informant on numerous occasions, where he indicated his desire to purchase weapons for a client in Colombia. Throughout the next year, he continued negotiations for the purchase of the weapons and was told by the informant that $100,000 had to be paid before the weapons would be transported from the United States. Mr. Gamarra-Murillo was arrested soon after an April 2004 meeting to finalize the transaction.

The U.S. Department of Commerce announced on August 8, 2005 that National-Oilwell L.P. ("NOW") of Houston, agreed to pay a $3,000 civil penalty to settle allegations that it violated the antiboycott provisions of the EAR. BIS charged that, on one occasion in 2001 in connection with transactions involving the sale and ultimate transfer of goods from the United States to Syria, NOW furnished prohibited information about its business relationships with Israel in violation of the antiboycott requirements. BIS also charged that NOW failed to report in a timely manner its receipt of the request from an intermediary in Croatia to provide such certification. The company voluntarily disclosed the transactions and cooperated fully with the investigation.

The U.S. Department of Commerce announced on August 9, 2005 that BJ Services Company USA, L.P. ("BJ Services") agreed to pay a $142,450 civil penalty to settle charges that it illegally exported chemicals without BIS authorization. BJ also must perform an audit of its internal compliance program that will be submitted to BIS’ Office of Export Enforcement. The agreement settled charges that between October 1999 and June 2002, BJ Services made 13 exports of items controlled for chemical-weapons reasons to various destinations without obtaining the required Department of Commerce export licenses. The settlement also alleged that on 12 occasions between October 1999 and June 2002, BJ Services sold items subject to the EAR, with knowledge that violations were about to occur. In addition, the settlement stated that on 12 occasions between October 1999 and June 2002, BJ Services filed or caused to be filed submissions that falsely stated that the items qualified for export from the United States without a license, when in fact a license was required. The investigation of the shipments at issue resulted from voluntary self-disclosures by BJ Services, which cooperated with BIS during the investigation. Self-disclosure is a mitigating factor in determining penalties for violations of the EAR.

On August 10, 2005, Harold J. De-Gregory, Jr., president of H&G Import Export ("H&G"), Ft. Lauderdale, was arrested and charged in an eightcount indictment with conspiracy to transport and smuggle in air commerce property containing hazardous materials ("HazMat") specifically radioactive Iridium-192, from the United States to the Bahamas. A Department of Homeland Security ("DHS") investigation disclosed that on multiple occasions, DeGregory, an FAA-certified pilot, transported Iridium-192 in H&G aircraft between Ft. Lauderdale and the Bahamas, and failed to identify the HazMat cargo on export and import documents, in violation of federal statutes. Iridium-192, an isotope used in industrial radiography, poses public health risks if not properly handled. Neither DeGregory nor H&G are licensed, trained, or certified to handle or transport radioactive HazMat.

The U.S. Department of Commerce announced on August 18, 2005 that The McFarland Cascade Pole and Lumber Company and The Oeser Company, manufacturers of lumber and wood products headquartered in Washington State, agreed to pay civil penalties to settle charges that they violated the EAR by exporting unprocessed Western red cedar to Canada for further processing at wood treatment plants, without obtaining licenses from BIS. Exports of unprocessed Western red cedar harvested from state and federal lands in the United States are controlled for short supply reasons and require a license for export to any destination outside the United States. McFarland agreed to settle charges relating to 1136 unlicensed exports of unprocessed Western red cedar to Canada for further processing from November 1999 to February 2004. McFarland will pay a civil penalty in the amount of $454,000. Oeser agreed to settle charges relating to 208 unlicensed exports of unprocessed Western red cedar to Canada for further processing during the same time period, and has agreed to pay a civil penalty in the amount of $83,200.

The United States Attorney for the Southern District of Florida, the United States Immigration and Customs Enforcement, and the Department of Commerce announced that on August 18, 2005, Chin Kan Wang and Robin Chang were indicted by a federal grand jury in Ft. Lauderdale, on charges of conspiracy to export controlled items and exportation of controlled items in violation of Title 18, United States Code, Section 371, and Title 50, United States Code, Section 1702. The indictment alleges that Chin Kan Wang and Robin Chang conspired to export and did export radio communication encryption modules, from the United States to Taiwan without having applied for and obtaining the required export license. The controlled encryption modules were destined for and sent to a company known as Taiwan Sato Kensetsu Kogyo Co., Ltd., located in Taipei, Taiwan, Republic of China, for use by the Taiwanese Coast Guard.

Kwonhwan Park, a South Korean national, was sentenced to 32 months in prison on August 30, 2005 following his admission that he violated the Arms Export Control Act by attempting to ship Black Hawk helicopter engines to China without first receiving proper authorization from the State Department. Park admitted that he tried to obtain engines for Sikorsky Aircraft’s Black Hawk helicopters as well as other military items in order to ship them to China. In addition to not seeking State Department permission, however, Park also provided misleading documents to the U.S. State Department representing that the engines, which were worth more than $1 million each, were going to be used by either the Malaysian army or the Korean army. Park also submitted sworn "end user" certificates bearing the purported signatures of Malaysian and Korean military officials, which were later determined to be fraudulent.

Four company owner/operators of Manten Electronics, Inc. pleaded guilty on September 13, 2005 to charges that they used their business to illegally transfer sensitive national-security controlled items to state-sponsored research institutes within the People’s Republic of China. The defendants specifically pleaded guilty to illegally exporting items that are used in a wide variety of defense weapons systems, including radar, smart weapons, electronic warfare and communications. The illegal exports were destined for entities controlled by the Chinese government. Among those entities was a Chinese Research Institute that the United States government has identified as posing an unacceptable risk in the development of weapons of mass destruction or missiles used to deliver weapons of mass destruction.

On September 17, 2005, the U.S. Justice Department announced that Office Depot, Inc., based in Delray Beach, Florida, agreed to pay $4.75 million to end a False Claims Act ("FCA") suit accusing the company of violating federal law by supplying a government agency with products made in countries that do not have reciprocal trade agreements with the United States. The settlement with Office Depot follows a similar agreement with Office Max, Inc. in May 2005 for $9.8 million. (See Sentinel Summer 2005 Enforcement Highlights)

The United States Attorney’s Office announced on September 21, 2005 that a jury in Federal Court in Milwaukee convicted Ning Wen of nine counts of conspiring to export more than $500,000 in restricted electronic components to the People’s Republic of China. The charges also include money laundering and making false statements to the Federal Bureau of Investigation. The case involved the export of restricted electronic components that had a wide variety of uses, including military radar and communications applications.

The U.S. Department of Commerce announced on September 26, 2005 that Sunford Trading, Ltd. of Hong Kong, Special Administrative Region, will pay a $33,000 civil penalty to settle charges that it violated the EAR in connection with an unlicensed export to the People’s Republic of China. In addition, a three-year denial of export privileges was also imposed upon Sunford. BIS charged that between November 1998 and July 1999, Sunford acted in violation of, and conspired with others to violate, the EAR by causing the export of an industrial vacuum furnace to China without the required Commerce Department license. Specifically, Sunford ordered the furnace knowing that a license was required, concealed the type of item being exported and the item’s actual end-user, and caused the export of the furnace despite the fact that the required license had not been obtained.

The U.S. Department of Commerce announced on September 26, 2005 that Bell Lumber and Pole Company, a manufacturer of lumber and wood products headquartered in New Brighton, Minnesota, agreed to pay civil penalties in the amount of $10,400 to settle charges that it violated the EAR by exporting unprocessed Western red cedar to Canada for further processing in the form of treatment with preservative without obtaining licenses from BIS. During the time period in which Bell made the exports in question, exports of Western red cedar harvested from state and federal lands in the United States that had been cut into poles, posts, or pilings for use as such and were intended for treatment with preservative outside the United States, required export licenses to all destinations. Such exports were controlled for short supply reasons. Bell agreed to settle charges relating to 26 unlicensed exports of unprocessed Western red cedar to Canada for further processing from April 27, 2000 to November 18, 2003.

The U.S. Department of Commerce announced on September 26, 2005 that Price Brothers (UK) Limited of Surrey, United Kingdom, agreed to pay civil penalties totaling $101,500 to settle charges pertaining to unlicensed reexports of U.S.-origin commodities from the United Kingdom to Libya. These reexports were made in violation of the EAR and a trade embargo against Libya, which was in place from January 1986 until April 2004. BIS charged that, on six occasions between January 2000 and April 2000, Price Brothers (UK) supplied machinery spare parts to an entity in the United Kingdom, which subsequently reexported them to Libya without obtaining licenses from BIS. BIS also charged that, on 23 occasions between June 2000 and June 2002, Price Brothers (UK) reexported machinery spare parts from the United Kingdom to a company in Libya without obtaining licenses from BIS. Price Brothers (UK) voluntarily self-disclosed the violations and cooperated fully in the investigation.

The U.S. Department of Commerce announced on October 24, 2005 that Alcoa Europe SA ("AESA"), a Swiss company and, indirectly, a wholly owned subsidiary of a U.S. company, agreed to pay a $6,000 civil penalty to settle allegations that it violated the antiboycott provisions of the EAR. BIS charged that, on six occasions, AESA failed to report in a timely manner its receipt of a request to refrain from supplying goods or materials manufactured or processed in Israel or using any Israeli organization to handle or transport the items. The transactions involved the sale and transfer of goods from the United States to Dubai, U.A.E. AESA voluntarily disclosed the transactions that led to the allegations and fully cooperated with the investigation.

This article is presented for informational purposes only and is not intended to constitute legal advice.