Industry News: V8N1


“Unreasonable” interpretations of the public domain exception

The US State Department recently announced proposed regulatory language that would restrict the publication of technical data. Recall that information that is in the “public domain,” i.e. information that has been published on the Internet or made available in a public library, is exempted from the definition of technical data in the ITAR and can be freely exported without license. The new regulatory language would essentially eliminate this exemption by requiring the prior approval of DDTC or three other enumerated government agencies before technical data can be released into the public domain.

In other words, DDTC holds the position that a picture of an M1 Abrams tank or a video from inside the Lake City Army Ammunition facility is not public domain until the government explicitly authorizes its release. DDTC tried to tamp down the outrage by saying this in connection with the proposed rule:

The requirements of paragraph (b) are not new. Rather, they are a more explicit statement of the ITAR’s requirement that one must seek and receive a license or other authorization from the Department or other cognizant U.S. government authority to release ITAR controlled ‘‘technical data,’’ as defined in § 120.10.

DDTC took a very different position on the definition of “public domain” in 1996, in United States v. Bernstein. An encryption developer brought suit against DDTC (then ODTC) and the State Department claiming that export controls on encryption products violated his First Amendment rights by foreclosing him from discussing in public the technical aspects of his encryption software. Bernstein then argued that the public domain exception was not a significant exception because technical data could never be in the public domain unless the Government approved the release.

DDTC disagreed, and called that an “unreasonable” interpretation of the public domain exception:

Plaintiff’s attack on the “public domain” exemption is also meritless. That provision contains several specific exceptions as to what is controlled as technical that any ordinary person can understand — information in bookstores, newsstands, or disclosed at conferences. Plaintiff sees a “Catch-22” “lurking” in the provision that, unless something is already published, it is subject to export controls. He would construe the definition to mean, in other words, that nothing can be published without the government’s approval. Not only is this wrong as a factual matter, […] it is by far the most un-reasonable interpretation of the provision, one that people of ordinary intelligence are least likely to assume is the case.

Except that’s exactly the opposite of DDTC’s current proposed regulatory language. Stay tuned, get comfy, and make some extra popcorn to share.

Ignorance is not bliss

A reported often within this column, The Office of Foreign Assets Control (“OFAC”) announced that it fined Production Products, Inc., a small family-run business in Maryland, the sum of $78,500 in connection with charges that the company exported HVAC duct manufacturing equipment to a company in China on the Specially Designated Nationals and Blocked Persons List. OFAC noted that, because the equipment was valued at $500,000, it could have fined the company $1 million and touted its own beneficence in imposing such a reduced fine.

Rather than using the opportunity to educate small businesses on export compliance, OFAC noted a number of “aggravating factors”, all of which boil down to the fact that PPI had no idea that there was an SDN List. While most companies know that certain things require an export license, most probably would be shocked to learn that nothing can be exported to an entity listed on the SDN list.

The Uncanny Resemblace Between Chinese and American Weapons

Popular Mechanics recently published a photo essay comparing more than a dozen US and Chinese weapons, noting that a significant number are visually similar. Admittedly, there are significant similarities between the F35 Joint Strike Fighter and the Chinese J-31 fighter, the US C-17 Globemaster and the Chinese Y-20 Heavy Transport, the BGM-71 TOW anti-tank missile and the HJ-8 Red Arrow anti-tank missile. The original photo comparison may be seen on the Chinese website here: Stolen or separated at birth? You be the judge.

Feds charge Chinese Woman with illegal plot to broker US weapons

A woman accused of trying to send an unmanned Hellfire missile-firing drone and jet fighter engines to China via South Florida, pleaded not guilty to federal charges of illegal military weapons brokering. Prosecutors say Wenxia Man, aka Wency, 44, was working with a man she called a “technology spy” who procures information from Russia and other nations “so that China can obtain sophisticated technology without having to conduct its own research.”

The so-called “technology spy,” Xinsheng Zhang, was indicted on related charges in South Florida but authorities said he is in China and has not yet been arrested. Investigators said Zhang discussed paying $50 million to an undercover operative in Broward to illegally ship an MG-9 Reaper, an unmanned drone that is “capable of firing Hellfire missiles and is classified as a defense article,” on the U.S. defense munitions list. Man and Zhang also tried to obtain engines for the F-35 Strike Fighter and the F-22 Raptor Jet Fighter engines and other military and defense items, authorities said. Zhang is an official agent for the procurement of war and defense items for the Chinese government, authorities said.

Prosecutors note that Man and Zhang were “well aware” they needed a license to export the drone and jet fighter engines. In an ironic twist, according to court documents, Man noted via email that “the buyer is real and that the money is from the [Chinese] movement, not a private party, but that they needed to make sure the seller was not from the Federal Bureau of Investigation because sometimes an FBI ‘officer’ disguises himself as a seller to detect spy activities.”

“The nature and circumstances of the offense, that is attempting to obtain and export weaponized unmanned aerial vehicles and engines for jet fighters to the People’s Republic of China, presents a substantial risk to the national security of the United States,” Assistant U.S. Attorney Michael Walleisa wrote in court records.