Actions recently taken by the Government demonstrate the attention being placed on U.S. exports. The Department of Justice (“DOJ”) announced on October 11, 2007 that multidepartment Counter-Proliferation Task Forces will be formed to combat illegal exports of military and dual-use technology, which could end up in the hands of hostile countries, making investigation of illegal exports a top counterintelligence priority for the DOJ. In addition, on October 16, 2007, the President signed into law amendments to the penalty provisions of the International Emergency Economic Powers Act (“IEEPA”).
Illegal Exports of Military and Dual-Use Technology
These high-profi le task forces will consist of offi cials from the DOJ, the U.S. Immigration and Customs Enforcement, the National Security Administration, the FBI Counterintelligence Division, the Department of Commerce’s Offi ce of Export Enforcement, the Defense Criminal Investigative Service and the State Department. The task forces will be placed in those U.S. districts with large concentrations of hightech businesses and research facilities, which are considered potential targets for illegal foreign acquisition efforts.
According to the DOJ, in 2006 there was a 43 percent increase in the number of suspicious foreign contacts with U.S. defense fi rms, and 108 countries were engaged in efforts to obtain controlled U.S. technology. The majority of recent U.S. criminal export prosecutions have involved restricted U.S. technology, stealth missile technology, military aircraft components, naval warship data, night vision equipment, and other restricted technology bound for China and Iran. Accordingly, the technology of particular concern to the U.S. Government includes dual-use equipment, restricted U.S. military items and other technical expertise or know-how that could have application in Weapons of Mass Destruction.
Although DOJ prosecutors have historically been reluctant to prosecute individuals and companies that illegally export such items, due to the complicated and time-consuming nature of bringing such cases, recent incidents involving exports to China and Iran prompted the launch of the task forces. The DOJ has posted a press release entitled Fact Sheet: Major U.S. Export Enforcement Actions in the Past Year to its website.
Following are some examples of recent illegal export cases:
- Two Utah men were arrested for allegedly attempting to sell F-4 and F-14 fi ghter jet parts over the Internet. F-14 fi ghter jet components are widely sought by Iran, the only government still using such jets.
- Two men in California pleaded guilty to exporting military-use technology to China, including computer code for training fi ghter pilots.
- SparesGlobal, Inc., a Pittsburgh company, was sentenced in the Western District of Pennsylvania on October 4, 2007 for conspiring to make false statements about an illegal export of graphite products potentially usable in nuclear reactors and nose cones of ballistic missiles. The graphite products were routed through the United Arab Emirates and ended up in Pakistan.
The Government offi cials handling these cases, including U.S. prosecutors, will be specially trained to recognize potentially illegal exports. The training initiative will be essential to prosecuting complex cases that involve intricate laws, sensitive international issues, agencies possessing different authorities and largely classifi ed information. The task forces will focus their attention on U.S.-based exporters selling or shipping equipment overseas without proper authorization.
In light of ever-increasing enforcement efforts by the U.S. Government, we recommend that companies review the export classifi cation of the articles, technical data and software that they sell, as well as the technologies used to design and produce the items sold. Further, companies should ensure that their export control policies and procedures are adequate to protect against illegal exports. In particular, it is important that companies review how they protect the technical data that they create, share and store electronically and monitor who may be able to access potentially sensitive information, intentionally or unintentionally.
Increased Penalties for Export Control Violations The President signed a bill on October 16, 2007, to increase the penalties for certain export control violations. The bill, an amendment to the IEEPA, was introduced by the Senate on June 13, 2007 as S. 1612, moved quickly between the Senate and House of Representatives, resulting in its passage by the House on October 2, 2007.
The new law will raise penalties for violations of certain export licenses, orders, regulations or prohibitions from $50,000 to a maximum of either $250,000 or twice the amount of the transaction that is the basis of the violation, whichever is greater. The new law will also increase maximum criminal penalties for violating IEEPA export control laws to $1,000,000, or 20 years imprisonment, or both. Prior to this amendment, the maximum criminal penalty was $50,000, or 10 years imprisonment, or both.
The changes to the civil and criminal penalties will be applied to all enforcement actions pending or commenced on or after the date the law is enacted.