Category

International Business

Nov 26

Iranian National Charged for Illegally Exporting Military Antennas from US

By Export, International Business

Amin Ravan, a citizen of Iran, and his Iran-based company, IC Market Iran (IMI), have been charged in an indictment unsealed today with conspiracy to defraud the United States, smuggling, and violating the Arms Export Control Act (AECA) in connection with the unlawful export of 55 military antennas from the United States to Singapore and Hong Kong. The charges are the result of an investigation by U.S. Immigration and Customs Enforcement’s (ICE) Homeland Security Investigations (HSI) and its federal law enforcement partners.

According to the indictment, which was returned under seal by a grand jury in Washington Nov. 16, Ravan was based in Iran and, at various times, acted as an agent of IMI in Iran and an agent of Corezing International Pte Ltd, a company based Singapore that also maintained offices in Hong Kong and China.

On Oct. 10, 2012, Ravan was arrested by authorities in Malaysia in connection with a U.S. provisional arrest warrant. The United States is seeking to extradite him from Malaysia to stand trial in Washington. If convicted of the charges against him, Ravan faces a potential 20 years in prison for the AECA violation, 10 years in prison for the smuggling charge and five years in prison for the conspiracy charge.

According to the indictment, in late 2006 and early 2007, Ravan attempted to procure for shipment to Iran export-controlled antennas made by a company in Massachusetts, through an intermediary in Iran. The antennas sought by Ravan were cavity-backed spiral antennas suitable for airborne or shipboard direction finding systems or radar warning receiver applications, as well as biconical antennas that are suitable for airborne and shipboard environments, including in several military aircraft.

After this first attempt was unsuccessful, Ravan joined with two co-conspirators at Corezing in Singapore so that Corezing would contact the Massachusetts company and obtain the antennas on behalf of Ravan for shipment to Iran. When Corezing was unable to purchase the export-controlled antennas from the Massachusetts firm, Corezing then contacted another individual in the United States who was ultimately able to obtain these items from the Massachusetts firm by slightly altering the frequency range of the antennas to avoid detection by the company’s export compliance officer.

In March 2007, Ravan and the co-conspirators at Corezing agreed on a purchase price of $86,750 for 50 cavity-backed antennas from the United States and discussed structuring payment from Ravan to his Corezing co-conspirators in a manner that would avoid transactional delays caused by the Iran embargo. Ultimately, between July and September 2007, a total of 50 cavity-backed spiral antennas and five biconical antennas were exported from the United States to Corezing in Singapore and Hong Kong.

According to the indictment, no party to these transactions – including Ravan or IMI – ever applied for or received a license from the State Department’s Directorate of Defense Trade Controls to export any of these antennas from the United States to Singapore or Hong Kong.

Two of Ravan’s co-conspirators, Lim Kow Seng, aka Eric Lim, and Hia Soo Gan Benson, aka Benson Hia, principals of Corezing, have been charged in a separate indictment in the District of Columbia in connection with this particular transaction involving the export of military antennas to Singapore and Hong Kong. The two Corezing principals were arrested in Singapore last year and the United States is seeking their extradition.

This investigation was jointly conducted by HSI special agents in Boston and Los Angeles; FBI agents and analysts in Minneapolis; and Department of Commerce, Office of Export Enforcement agents and analysts in Chicago and Boston.

Substantial assistance was provided by the U.S. Department of Defense, U.S. Customs and Border Protection, the State Department’s Directorate of Defense Trade Controls, and U.S. Department of Justice, Office of International Affairs.

The prosecution is being handled by Assistant U.S. Attorney Anthony Asuncion of the U.S. Attorney’s Office for the District of Columbia and Trial Attorney Richard S. Scott of the Counterespionage Section of the Justice Department’s National Security Division.

SOURCE: ICE

Oct 29

Homeland Security Seizes Nearly 800 Counterfeit Sports Team Hats and Jerseys

By Customs IP Enforcement, Intellectual Property, International Business

Photo by ICE

U.S. Immigration and Customs Enforcement’s (ICE) Homeland Security Investigations (HSI) seized 795 counterfeit items in New Orleans Tuesday with a manufacturer’s suggested retail price (MSRP) of $29,630. The seized items include counterfeit National Football League jerseys, hats bearing the logos of National Football League, Major League Baseball, National Basketball Association and National Hockey League teams, and several counterfeit designer bags.

Last year HSI New Orleans led the nation in counterfeit NFL seizures with more than 7,100 items at an MSRP of more than $1 million. As the host city of the upcoming Super Bowl, Raymond R. Parmer Jr., special agent in charge of HSI New Orleans, said HSI special agents are particularly focused on the identification and seizure of counterfeit sports memorabilia ahead of the game.

“The bottom line is counterfeit goods steal revenue from legitimate businesses and shortchange buyers who think they’re getting the real deal,” said Parmer. “Criminals should take note that we are actively looking for contraband on a daily basis and counterfeit goods will be seized and violators prosecuted to the fullest extent of the law.”

During a routine operation HSI learned the counterfeit goods seized Tuesday were being shipped from an overseas location into New Orleans. HSI then intercepted the shipment and seized the contraband items. Although there were no arrests, the HSI investigation is ongoing.

HSI and partner National Intellectual Property Rights Coordination Center (IPR Center) continually work to keep counterfeit goods off the streets and bring those responsible for producing and distributing them to justice.

The IPR Center is one of the U.S. government’s key weapons in the fight against criminal counterfeiting, piracy and commercial fraud. As a task force, the IPR Center uses the expertise of its 21-member agencies to share information, develop initiatives, coordinate enforcement actions and conduct investigations related to IP theft and commercial fraud. Through this strategic interagency partnership, the IPR Center protects the public’s health and safety, the U.S. economy and our war fighters.

SOURCE: ICE

Oct 29

Paraguayan Authorities and Homeland Security Seize More Than $34 Million in Counterfeit Goods

By Blog, Customs IP Enforcement, Intellectual Property, International Business, International IP

Over the past 15 months, U.S. Immigration and Customs Enforcement’s (ICE) Homeland Security Investigations (HSI) has provided extensive training and capacity building to Paraguay’s customs office and other Paraguayan law enforcement partners. This training has been very successful, as Paraguayan authorities, working closely with the HSI Buenos Aires attaché, are making extensive seizures of counterfeit goods.

“Partnerships with international customs agencies and border security agents are essential to combating intellectual property theft,” said Raul O. Aguilar, HSI Buenos Aires attaché. Aguilar oversees HSI throughout the southern cone of South America. “HSI is proud to support our Paraguayan colleagues with our expertise in disrupting criminal organizations that import counterfeit products and goods. Fighting these organizations demands a response that is transnational and well-coordinated. I am truly proud of the collaboration we have built with our counterparts.”

Two major recent seizures include:

On Oct. 16, Paraguayan authorities, working collaboratively with HSI, seized counterfeit merchandise with a manufacturer’s suggested retail price (MSRP) of $34 million. On Oct. 11, Paraguayan authorities received information about counterfeit products being smuggled out of Silvio Pettirossi International Airport in Asunción. A criminal organization was attempting to smuggle these goods out of the country — possibly destined for the United States. Law enforcement discovered multiple high-quality counterfeit brand name watches of Swiss origin. Among the various brands were watches from Patek Philippe, Tissot, Tag Heuer, Bulgari and Hublot. In addition, approximately 12,500 counterfeit Samsung cellular phones were discovered. The products were ultimately seized by law enforcement.

On Sept. 26, Paraguayan Customs, working with HSI, identified and searched a shipment of containers sent to Ciudad del Este, Paraguay, from Uruguay. The three containers and their contents included counterfeit Xbox, PlayStation and Nintendo gaming systems. The shipment, with an MSRP of $741,041, was subsequently seized by Paraguayan authorities. This specific case has been presented to the Paraguayan Public Ministry for prosecution.

“HSI will continue to provide training exercises and build strong partnerships with our Paraguayan counterparts in order to assist in the targeting and interception of shipments containing smuggled and illicit cargo,” added Aguilar. “Such training has been instrumental in increasing the abilities of the various agencies within the Republic of Paraguay, and has contributed to an increase in seizures.”

These seizures are the result of HSI’s Illicit Pathways Attack Strategy (IPAS). Over the last two decades, transnational organized crime (TOC) has transformed in size, scope and impact — posing a significant threat to national and international security. TOC networks are proliferating, striking new and powerful alliances, and engaging in a range of illicit activities as never before. The result is a convergence of threats that have evolved to become more complex, volatile and destabilizing. HSI’s response was the creation of the IPAS to break TOC strongholds.

HSI takes very seriously the threat to national security that TOC represents. HSI designed IPAS to focus its resources in a manner that best targets, disrupts and dismantles TOC while maximizing efficiency. IPAS provides a methodology and mechanism for HSI to prioritize threats and vulnerabilities within its mission and to coordinate its own efforts internally and among federal partners. IPAS enhances HSI’s and host country partners’ abilities to investigate and prosecute individuals involved in TOC organizations that threaten the stability and national security of the host countries and pose continuing threats to the homeland security of the United States. Prioritization allows HSI to strategically focus enforcement and capacity building efforts along the continuum of crime within and beyond U.S. borders. IPAS provides a structure for engagement with host country partners — including Paraguay — to increase joint investigations, enhance exchange of information, and support foreign and domestic prosecutions. The IPAS strategy is extremely important in the tri-border area of Paraguay, Brazil and Argentina, where the propensity for TOC organizations is immense.

Source: ICE

Oct 03

Russians Indicted for Illegal Export of High-Tech Microelectronics from US to Russia

By Export, International Business

An indictment was unsealed today in United States District Court for the Eastern District of New York charging 11 members of a Russian military procurement network operating in the United States and Russia, as well as a Texas-based export company and a Russia-based procurement firm, with illegally exporting high-tech microelectronics from the United States to Russian military and intelligence agencies.1 Alexander Fishenko, an owner and executive of the American and Russian companies, is also charged with operating as an unregistered agent of the Russian government inside the United States by illegally procuring the high-tech microelectronics on behalf of the Russian government. The microelectronics allegedly exported to Russia are subject to strict government controls due to their potential use in a wide range of military systems, including radar and surveillance systems, weapons guidance systems, and detonation triggers.

The charges were announced by Loretta E. Lynch, United States Attorney for the Eastern District of New York; Lisa Monaco, Assistant Attorney General, National Security Division, Department of Justice; Stephen L. Morris, Special Agent in Charge, Federal Bureau of Investigation, Houston Field Office; Under Secretary of Commerce Eric L. Hirschhorn, Department of Commerce; and Timothy W. Reeves, Special Agent in Charge, Naval Criminal Investigative Service, Central Field Office. The arrested defendants will be arraigned later today before United States Magistrate Judge George C. Hanks, Jr., at the U.S. Courthouse in Houston, Texas, where the government will seek their removal to the Eastern District of New York.

In addition to the unsealing of the charges, search warrants were executed today at seven residences and business locations associated with the defendants, and seizure warrants were executed on five bank accounts held by Fishenko and defendant Arc Electronics, Inc., the Texas-based export company. In conjunction with the unsealing of these charges, the Department of Commerce has added 165 foreign persons and companies who received, transshipped, or otherwise facilitated the export of controlled commodities by the defendants to its “Entity List.” This designation imposes a license requirement before any commodities can be exported from the United States to these persons or companies, and establishes a presumption that no such license will be granted.

The Scheme

As alleged in the indictment, between approximately October 2008 and the present, Fishenko and the other defendants engaged in a surreptitious and systematic conspiracy to obtain advanced, technologically cutting-edge microelectronics from manufacturers and suppliers located within the United States and to export those high-tech goods to Russia, while carefully evading the government licensing system set up to control such exports. The microelectronics shipped to Russia included analog-to-digital converters, static random access memory chips, microcontrollers, and microprocessors. These commodities have applications, and are frequently used, in a wide range of military systems, including radar and surveillance systems, missile guidance systems and detonation triggers. Russia does not produce many of these sophisticated goods domestically.

According to the indictment and a detention motion filed by the government today, defendant Alexander Fishenko was born in what was, at the time, the Soviet Republic of Kazakhstan, and graduated from the Leningrad Electro-Technical Institute in St. Petersburg, Russia. He immigrated to the United States in 1994, and became a naturalized citizen of the United States in 2003. In 1998, he founded defendant Arc Electronics, Inc. (“Arc”) in Houston. Between 2002 and the present, Arc has shipped approximately $50,000,000 worth of microelectronics and other technologies to Russia. Fishenko and his wife are the sole owners of Arc, and Fishenko serves as the company’s President and Chief Executive Officer. Fishenko is also a part owner and executive of defendant Apex System, L.L.C. (“Apex”) a Moscow, Russia-based procurement firm. Apex, working through subsidiaries, served as a certified supplier of military equipment for the Russian government. Between 1996 and the present, Fishenko has regularly traveled back and forth between the United States and Russia. Defendant Alexander Posobilov entered the United States from Russia in 2001, and became a naturalized citizen in 2008. He joined Arc in 2004, and serves as its director of procurement. Posobilov was arrested at George Bush Intercontinental Airport in Houston on his way to Singapore and Moscow.

The defendants allegedly exported many of these high-tech goods, frequently through intermediary procurement firms, to Russian end users, including Russian military and intelligence agencies. To induce manufacturers and suppliers to sell them these high-tech goods, and to evade applicable export controls, the defendants often provided false end user information in connection with the purchase of the goods, concealed the fact that they were exporters, and falsely classified the goods they exported on export records submitted to the Department of Commerce. For example, in order to obtain microelectronics containing controlled, sensitive technologies, Arc claimed to American suppliers that, rather than exporting goods to Russia, it merely manufactured benign products such as traffic lights. Arc also falsely claimed to be a traffic light manufacturer on its website. In fact, Arc manufactured no goods and operated exclusively as an exporter.

According to the court documents, the defendants went to great lengths to conceal their procurement activities for the Russian military. For example, on one occasion, defendants Posobilov and Yuri Savin, the Director of Marketing at another Russian procurement firm, discussed how best to conceal the fact that certain goods Savin had purchased from Arc were intended for the Russian military. Savin asked Posobilov, “What can we do if a client is military all over?” Posobilov replied, “We can’t be the ones making things up. You should be the ones.” Similarly, on another occasion defendant Fishenko directed a Russian procurement company that, when the company provided false end user information, to “make it up pretty, correctly, and make sure it looks good.” On yet another occasion, Posobilov instructed a Russian procurement company to “make sure that” the end use certificate indicated “fishing boats, and not fishing/anti-submarine ones . . . Then we’ll be able to start working.”

Despite this subterfuge, according to the documents, the investigation revealed that the defendants were supplying Russian government agencies with sophisticated microelectronics. For example, the investigation uncovered a Russian Ministry of Defense document designating an Apex subsidiary as a company “certified” to procure and deliver military equipment and electronics. The FBI also recovered a letter sent by a specialized electronics laboratory of Russia’s Federal Security Service (“FSB”), Russia’s primary domestic intelligence agency, to an Apex affiliate regarding certain microchips obtained for the FSB by Arc. The letter stated that the microchips were faulty, and demanded that the defendants supply replacement parts.

In addition, in anticipation of an inquiry by the Department of Commerce regarding the export of certain controlled microelectronics, defendants Fishenko, Posobilov, and Arc salesperson Viktoria Klebanova allegedly directed Apex executives Sergey Klinov and Dmitriy Shegurov, as well as other Apex employees, to alter Apex’s website and forge documents regarding certain transactions to hide Apex’s connections to the Russian military. In connection with the cover-up, Apex removed images of Russian military aircraft and missiles and other links to the Russian Ministry of Defense from its website.

The Arc Defendants

In addition to Fishenko, Posobilov, and Klebanova, the indictment charges Arc salespersons Lyudmila Bagdikian, Anastasia Diatlova, Sevinj Taghiyeva, and Svetalina Zagon, as well as Arc shipping manager Shavkat Abdullaev, with one count of conspiring to violate and twenty-one counts of violating the International Emergency Economic Powers Act (“IEEPA”) and the Arms Export Control Act (“AECA”), and with conspiring to commit wire fraud. According to the indictment, these defendants obtained controlled microelectronics by lying and submitting false information regarding the true nature, users, and intended uses of the high-tech goods, then exporting the goods, without the required licenses, to procurement firms in Russia. The defendants’ principal port of export for these goods was John F. Kennedy International Airport in the Eastern District of New York.

The Foreign Defendants

According to the indictment, in addition to owning and controlling Arc, Fishenko is also a controlling principal of the Russian procurement firm Apex, the defendant Sergey Klinov is the chief executive officer of Apex, and the defendant Dmitriy Shegurov is an employee of Apex. Apex and its affiliates supplied microelectronics to Russian government agencies, including Russian military and intelligence agencies. The defendant Yuri Savin was the Director of Marketing at Atrilor, Ltd., another Russian procurement firm. Klinov, Shegurov and Savin conspired with Fishenko and the Arc defendants to obtain controlled U.S.-origin microelectronics and to export those technologically sensitive goods to Russia without the required export licenses by falsifying information to hide the true nature, users and intended uses of the goods. In addition, Fishenko, Posobilov, Klebanova, Klinov and Shegurov were charged with obstruction of justice, and Fishenko and Arc were charged with conspiring to commit money laundering.

The individual defendants face maximum terms of incarceration of five years for the conspiracy charge, twenty years for each of the substantive IEEPA and AECA charges, and twenty years for the obstruction of justice charge. In addition, Fishenko faces a maximum term of incarceration of twenty years for conspiring to commit money laundering, and ten years for acting as an unregistered agent of the Russian government. The corporate defendants face fines of up to $500,000 for the conspiracy count and $1,000,000 for each of the substantive IEEPA and AECA counts.

“As alleged in the indictment, the defendants spun an elaborate web of lies to evade the laws that protect our national security. The defendants tried to take advantage of America’s free markets to steal American technologies for the Russian government. But U.S. law enforcement detected, disrupted, and dismantled the defendants’ network,” stated United States Attorney Loretta E. Lynch. “We will not rest in our efforts to protect the technological advantage produced by American ingenuity. And, we will expose and hold responsible all who break our counter-proliferation laws, particularly those, like Fishenko, who serve foreign governments.” Ms. Lynch thanked the United States Attorney’s Office for the Southern District of Texas for its assistance in this matter.

“Today’s case underscores the importance of safeguarding America’s sensitive technology and our commitment to disrupt and prosecute networks that attempt to illegally export these goods,” said Lisa Monaco, Assistant Attorney General for National Security. “I applaud the many agents, analysts, and prosecutors who worked on this extensive investigation.”

“In this day and time, the ability of foreign countries to illegally acquire sensitive and sophisticated U.S. technology poses a significant threat to both the economic and national security of our nation,” said Houston FBI Special Agent in Charge Stephen L. Morris. “While some countries may leverage our technology for financial gain, many countries hostile to the United States seek to improve their defense capabilities and to modernize their weapons systems at the expense of U.S. taxpayers. The FBI will continue to work aggressively with our partners in the U.S. Intelligence Community to protect this technology and hold accountable those companies that willfully choose to violate our U.S. export laws.”

“Today’s action is a perfect example of two of the core benefits of the Administration’s export control reform effort – higher enforcement walls around controlled items and extensive coordination and cooperation among the enforcement agencies. I applaud our special agents who worked with the Justice Department in the interagency effort that led to today’s actions,” said Under Secretary of Commerce Eric L. Hirschhorn.

“The receipt of U.S.-made, cutting-edge microelectronics has advanced Russia’s military technological capabilities. NCIS and the Department of the Navy have worked closely with the FBI, the Department of Justice, and the Department of Commerce in this investigation due to the potential for significant enhancement of Russian naval weapons systems that would result from the illegal acquisition of these export-controlled technologies,” said Special Agent in Charge Timothy W. Reeves, NCIS Central Field Office.

As a result of this case, there may be victims and witnesses who need to contact the agencies involved in the investigation. If your business has been approached by one of the defendants, or by someone trying to obtain export-protected, sensitive technology who appeared not to be legitimate, please report that information to[email protected]. The information will remain confidential and will be handled by the appropriate authorities.

The government’s case is being prosecuted by Assistant United States Attorneys Daniel Silver, Hilary Jager, and Claire Kedeshian, as well as Trial Attorney David Recker of the Counterespionage Section of the Department of Justice.

The Defendants:

Arc Electronics, Inc.
Principal Place of Business: Houston, Texas

Apex System, L.L.C.
Principal Place of Business: Moscow, Russia

Alexander Fishenko
Age: 46

Shavkat Abdullaev
Age: 34

Lyudmila Bagdikian
Age: 58

Anastasia Diatlova
Age: 38

Viktoria Klebanova
Age: 37

Sergey Klinov:
Age: 44

Alexander Posobilov
Age: 58

Yuri Savin:
Age: 36

Dmitriy Shegurov
Age: Unknown

Sevinj Taghiyeva
Age: 32

Svetalina Zagon
Age: 31

 

_____________________
1The charges contained in the indictment are merely allegations, and the defendants have not yet been convicted of these offenses.

SOURCE: DEPARTMENT OF JUSTICE

Oct 01

India’s Supreme Court: Enforce Patents or Provide Generic Drugs for the Poor?

By Blog, International Business, International IP
“A child suffering from cancer in New Delhi, India. This week, India’s Supreme Court hears arguments in a case that will affect how many poor people can afford cancer drugs. Novartis is defending a patent on its cancer medication, Gleevec.”- American Public Media’s Marketplace.org (Photo by Sajjad Hussain/AFP/Getty Images)

According to Reuters, Swiss drug maker Novartis is trying to secure patent protection for one of its drugs, Glivec, in India. Its taken the case up to India’s Supreme Court because patent protection was denied protection in the lower courts which found that the drug wasn’t a new molecule, but rather an amended version of a known compound.

According to America Public Media’s Marketplace, Novartis first developed Glivec in the 1990s. Since then, it has modified its drug, which is why Novartis believes it deserves a patent. Ranjit Shahani, a company president, says “Glivec is widely recognized as a medical breakthrough and has been granted a patent in more than 40 countries, including China, Russia, and Taiwan.” However, India’s courts denied the patent in 2006 because its not really new under Indian law, which prevents pharmaceutical companies from from continually renewing patents on existing drugs by making slight changes to original medications.

However, what’s at stake isn’t really about getting Indian patent protection for Glivec in India at all. Reuters explains that India only accounts for a small fraction of Novartis’ total global sales. And Glivec is only used to treat chronic myeloid leukaemia and some gastrointestinal cancers. The issue is much bigger than that. Its really all about the global production of generic drugs.

India is the world’s largest exporter of cheap generic drugs. In fact, India is considered the pharmacy of developing world. Leena Menghaney, who is with the aid organization Doctors Without Borders, told Marketplace that generic versions of Glivec in India cost 96 percent less than in the United States, where the drug is patented and costs $70,000 for a year’s supply. Megnhaney explains, “If Novartis wins, the generic industry will possibly move back from producing some of the drugs they produce today. So this will have a chilling effect on generic competition.”

Novartis and other large drug makers are concerned that a ruling against patent protection would cement India’s status as a country in which patents are extremely hard to protect. Critics of big Western drug makers say that a win for Novartis would jeopardize the supply of cheap generic drugs to hundreds of millions of poor people around the world.

So one the one hand, there are millions of poor people who can’t afford to pay for drugs that are protected by patents. On the other, pharmaceutical companies are fighting for the exclusive rights to produce the drugs that they invented, in which they have invested countless years and resources.

Sep 20

Customs Seizes $29K in Unreported Currency

By Blog, Export, Import, International Business

U.S. Customs and Border Protection (CBP) officers at Washington Dulles International Airport (IAD) seized $29,000 Monday from a Ghanaian woman for violating federal currency reporting regulations.

The passenger, who arrived to Dulles from London, declared possessing less than $10,000. While examining her bags, CBP officers discovered a large sum of U.S. currency in a zippered compartment of her handbag. The final count was $29,000.

There is no limit to how much currency travelers can import or export; however federal law requires travelers to report to CBP amounts exceeding $10,000 in U.S. dollars or equivalent foreign currency.

CBP officers seized the $29,000 and advised the traveler how to petition for the return of her seized currency.

“Travelers who refuse to comply with federal currency reporting requirements run the risk of having their currency seized, and may potentially face criminal charges,” said Christopher Hess, CBP port director for the Port of Washington. “The traveler was given the opportunity to truthfully report her currency. The easiest way to hold on to your money is to report it.”

In addition to narcotics interdiction, CBP routinely conducts inspection operations on arriving and departing international flights and intercepts currency, weapons, prohibited agriculture products or other illicit items.

Travelers are encouraged to visit CBP’s Travel website to learn rules governing travel to and from the U.S. ( Travel )

The Privacy Act prohibits releasing the traveler’s name since she was not criminally charged.

SOURCE: CBP

 

Sep 20

Officers Seize 17 Vehicles and Assess $93,500 in Fines

By Export, Import, International Business

Recently, U.S. Customs and Border Protection officers working outbound operations at the Santa Teresa port of entry seized 17 vehicles and assessed penalties totaling $93,500.

The discovery was made when CBP officers, conducting routine outbound enforcement operations in the vehicle export facility, detected issues with the paperwork linked to several vehicles destined for Mexico. Further investigation resulted in the seizure of 17 vehicles attempting to circumvent the CBP exportation process by presenting fraudulent export paperwork. Each of the 17 violations carries a fine of $5,500. A total of $93,500 in fines and penalties were assessed against the exporter. All 17 vehicles were also seized by CBP.

“This entire episode is curious because there was really nothing to gain here other than a small savings in time,” said CBP Santa Teresa assistant port director Fred Hutterer. “CBP does not charge a fee to process vehicles for export.”

The CBP vehicle export process is fairly simple. An exporter presents his original certificate of title or certified copy of the certificate of title and the CBP export cover sheet with the vehicle’s information (VIN/make/model) to CBP officers. The copies are date and time stamped which initiates the 72-hour requirement of the vehicle to remain in the United States prior to the formal export. During this 72-hour window CBP performs a series of checks to make sure the vehicle is eligible for export. After the 72 hours have elapsed the exporter will present the original title and the vehicle to CBP for verification. Once CBP determines that all requirements have been met the vehicle can be exported.

CBP officers at the Santa Teresa port process approximately 36,000 vehicles for export annually. The Santa Teresa port of entry is the only designated vehicle export location in the El Paso area.

SOURCE: CBP

Sep 14

Members of Counterfeit Nike Sneaker Ring Face Up to 5 Years in Prison and $250,000 Fine

By Customs IP Enforcement, Export, Import, Intellectual Property, International Business, International IP, News

Registered Trademark of Nike

Five individuals have pleaded guilty to conspiring to import misclassified merchandise. Each faces up to five years in federal prison and a $250,000 fine. This case is being investigated by U.S. Immigration and Customs Enforcement’s (ICE) Homeland Security Investigations (HSI).

“The trademark laws in the United States were created to protect the investment of American manufacturers such as Nike as well as consumers,” said U.S. Attorney William J. Hochul Jr., Western District of New York. “These laws are designed to create a level playing field for businesses and protect consumers who might unwittingly purchase inferior counterfeit goods. Our office will continue to aggressively enforce customs laws for the benefit of American businesses and those who purchase their products.”

“Selling counterfeit goods is stealing,” said James C. Spero, special agent in charge of HSI Buffalo. “HSI is committed to ensuring the legitimate copyright holders are protected from individuals who are only motivated by greed. People and organizations which produce and sell counterfeit products undermine the U.S. economy; create inferior and sometimes dangerous products; and jeopardize public safety.”

Xiao Cheng Lin, 50, and his wife, Ling Zhen Hu, 51, both of New York, pleaded guilty before U.S. District Judge Richard J. Arcara to conspiring to import misclassified merchandise. Hu, a native of China, worked for an individual who imported thousands of pairs of sneakers from China that bore the Nike “swoosh” logo and Nike labeling, but were not genuine Nike sneakers. Hu then negotiated the sale of large quantities of the mislabeled sneakers to Malik Bazzi, 44, of Montreal, who then sold them to customers throughout the United States — including in Buffalo — via his warehouses in Manhattan and Brooklyn. Bazzi is currently scheduled to be sentenced Feb. 1, 2013. Hu admitted that she negotiated the sale of 7,500 pairs of sneakers to Bazzi.

Lin, also a native of China, worked with his wife, delivering the 7,500 pairs of sneakers to Bazzi. The HSI investigation revealed that Bazzi’s customers then sold the counterfeit Nike sneakers on the street and in retail stores to customers for about half the price of genuine Nike sneakers.

As part of their plea agreements, both Lin and Hu agreed to abandon any claim to more than $600,000 and dozens of pairs of counterfeit sneakers seized from their New York residence following their 2007 arrest.

The defendants were arrested along with 21 others. To date, 20 of the defendants have been convicted.

On Sept. 5, 2012, LaKeith Fowler, 32, of Dallas, pleaded guilty before Judge Arcara to conspiring to traffic in counterfeit sneakers. Fowler, one of Bazzi’s customers, purchased and sold approximately 12,000 pairs of counterfeit Nike sneakers he obtained from Bazzi from April to September 2007. Fowler sold the sneakers in a retail store he owned in the Dallas-area. As part of his plea agreement, Fowler agreed to forfeit two bank accounts to the government which contain over $44,000 in deposits. The accounts were used to conduct counterfeit sneaker transactions.

On Sept. 7, 2012, Davion Briant, 37, of Milwaukee, also pleaded guilty before Judge Arcara to conspiring to traffic in counterfeit sneakers. Briant, another of Bazzi’s customers, purchased and sold approximately 4,500 pairs of counterfeit Nike sneakers he obtained from Bazzi from April to September 2007. Briant owned a retail store in the Milwaukee-area where he sold the counterfeit sneakers.

On Sept. 10, 2012, Hussien Sara, 30, of New York, pleaded guilty before Judge Arcara to conspiring to traffic in counterfeit sneakers. Sara worked in Bazzi’s warehouses where, on behalf of Bazzi, he took delivery of over 13,000 pairs of counterfeit sneakers from several suppliers, including Hu and Lin. In addition, Sara assisted in packaging the sneakers for shipment to Bazzi’s customers located throughout the United States.

Lin and Hu will be sentenced Jan. 24, 2013; Fowler Dec. 14, 2012; Briant Jan. 7, 2013; and Sara Jan. 11, 2013. All will be sentenced by Judge Arcara in Buffalo.

SOURCE: ICE

Sep 05

Hong Kong Jewelry Exporter Faces Nearly $2 million in Fines and Restitution

By Blog, Export, Import, International Business

Recently, a Hong Kong-based jewelry exporter pleaded guilty to customs fraud charges and faces nearly $2 million in fines and restitution in a scheme discovered by U.S. Customs and Border Protection’s (CBP) Regulatory Audit Unit and investigated by U.S. Immigration and Customs Enforcement’s (ICE) Homeland Security Investigations (HSI).

Fai Po Jewellery (H.K.) Co., LTD, admitted to intentionally submitting false invoices to the government in connection with the importation of merchandise in order to avoid paying more than $1 million in customs duties. The company was also ordered to pay an $800,000 criminal fine and restitution of $1,017,737. Additionally, the company was ordered to pay the cost of the investigation in the amount of $144,324 and was placed on three years’ probation.

HSI special agents found that from early 2007 to late 2009, Fai Po enclosed false invoices in their direct shipments to U.S. purchaser ShopNBC while sending the actual full value invoice to the purchaser by email. Fai Po advised the purchaser to ignore the invoice enclosed in the shipment because it was there only to avoid customs clearance issues.

Since Fai Po was acting as both the exporter and importer, the company was responsible for customs duties, not the U.S. purchaser. The purchaser paid the higher amount listed on the true invoice, while Fai Po declared to the government the lower value on the fraudulent invoice. The purchaser was not aware of Fai Po’s scheme and didn’t receive any benefit from it.

“A few deliberate pen strokes on a customs declaration form amounted to the theft of more than $1 million from the American people,” said Brad Bench, special agent in charge of HSI Seattle, who oversees investigations in Alaska. “The defendant apparently believed its actions would go unnoticed, but it didn’t count on CBP’s ability to detect this anomaly or HSI’s commitment to holding those who commit customs fraud accountable.”

The fraud was detected by CBP when an audit revealed a discrepancy between the actual value of the gold jewelry shipment and what was stated on the fraudulent invoices.

Under the terms of probation, Fai Po is required to appoint a responsible corporate officer who will be required to prepare and submit quarterly reports to the U.S. Probation Office to ensure that no similar conduct occurs in the future.

SOURCE: ICE

Aug 06

$75 Million in Total Export Penalties for Illegally Helping China Develop Attack Helicopter

By Export, International Business, ITAR, Technology Transactions

Pratt & Whitney Canada Corp. (PWC), a Canadian subsidiary of the Connecticut-based defense contractor United Technologies Corporation (UTC),  pleaded guilty to violating the Arms Export Control Act and making false statements in connection with its illegal export to China of U.S.-origin military software used in the development of China’s first modern military attack helicopter, the Z-10.

In addition, UTC, its U.S.-based subsidiary Hamilton Sundstrand Corporation (HSC) and PWC have all agreed to pay more than $75 million as part of a global settlement with the Justice Department and State Department in connection with the China arms export violations and for making false and belated disclosures to the U.S. government about these illegal exports.  Roughly $20.7 million of this sum is to be paid to the Justice Department.  The remaining $55 million is payable to the State Department as part of a separate consent agreement to resolve outstanding export issues, including those related to the Z-10.  Up to $20 million of this penalty can be suspended if applied by UTC to remedial compliance measures.  As part of the settlement, the companies admitted conduct set forth in a stipulated and publicly filed statement of facts.

Today’s actions were announced by David B. Fein, U.S. Attorney for the District of Connecticut; Lisa Monaco, Assistant Attorney General for National Security; John Morton, Director of U.S. Immigration and Customs Enforcement (ICE); Ed Bradley, Special Agent in Charge of the Northeast Field Office of the Defense Criminal Investigative Service (DCIS); Kimberly K. Mertz, Special Agent in Charge of the FBI New Haven Division; David Mills, Department of Commerce Assistant Secretary for Export Enforcement; and Andrew J. Shapiro, Assistant Secretary of State for Political-Military Affairs.

The Charges

Today in the District of Connecticut, the Justice Department filed a three-count criminal information charging UTC, PWC and HSC.  Count One charges PWC with violating the Arms Export Control Act in connection with the illegal export of defense articles to China for the Z-10 helicopter.  Count Two charges PWC, UTC and HSC with making false statements to the U.S. government in their belated disclosures relating to the illegal exports.  Count Three charges PWC and HSC with failure to timely inform the U.S. government of exports of defense articles to China.

While PWC has pleaded guilty to Counts One and Two, the Justice Department has recommended that prosecution of UTC and HSC on Count Two, and PWC and HSC on Count Three be deferred for two years, provided the companies abide by the terms of a deferred prosecution agreement with the Justice Department.  As part of the agreement, the companies must pay $75 million and retain an Independent Monitor to monitor and assess their compliance with export laws for the next two years.

The Export Scheme

Since 1989, the United States has imposed a prohibition upon the export to China of all U.S. defense articles and associated technical data as a result of the conduct in June 1989 at Tiananmen Square by the military of the People’s Republic of China.  In February 1990, the U.S. Congress imposed a prohibition upon licenses or approvals for the export of defense articles to the People’s Republic of China.  In codifying the embargo, Congress specifically named helicopters for inclusion in the ban.

Dating back to the 1980s, China sought to develop a military attack helicopter.  Beginning in the 1990s, after Congress had imposed the prohibition on exports to China, China sought to develop its attack helicopter under the guise of a civilian medium helicopter program in order to secure Western assistance.  The Z-10, developed with assistance from Western suppliers, is China’s first modern military attack helicopter.

During the development phases of China’s Z-10 program, each Z-10 helicopter was powered by engines supplied by PWC.  PWC delivered 10 of these development engines to China in 2001 and 2002.  Despite the military nature of the Z-10 helicopter, PWC determined on its own that these development engines for the Z-10 did not constitute “defense articles,” requiring a U.S. export license, because they were identical to those engines PWC was already supplying China for a commercial helicopter.

Because the Electronic Engine Control software, made by HSC in the United States to test and operate the PWC engines, was modified for a military helicopter application, it was a defense article and required a U.S. export license.  Still, PWC knowingly and willfully caused this software to be exported to China for the Z-10 without any U.S. export license.  In 2002 and 2003, PWC caused six versions of the military software to be illegally exported from HSC in the United States to PWC in Canada, and then to China, where it was used in the PWC engines for the Z-10.

According to court documents, PWC knew from the start of the Z-10 project in 2000 that the Chinese were developing an attack helicopter and that supplying it with U.S.-origin components would be illegal.  When the Chinese claimed that a civil version of the helicopter would be developed in parallel, PWC marketing personnel expressed skepticism internally about the “sudden appearance” of the civil program, the timing of which they questioned as “real or imagined.”  PWC nevertheless saw an opening for PWC “to insist on exclusivity in [the] civil version of this helicopter,” and stated that the Chinese would “no longer make reference to the military program.” PWC failed to notify UTC or HSC about the attack helicopter until years later and purposely turned a blind eye to the helicopter’s military application.

HSC in the United States had believed it was providing its software to PWC for a civilian helicopter in China, based on claims from PWC.  By early 2004, HSC learned there might an export problem and stopped working on the Z-10 project.  UTC also began to ask PWC about the exports to China for the Z-10.  Regardless, PWC on its own modified the software and continued to export it to China through June 2005.

According to court documents, PWC’s illegal conduct was driven by profit.  PWC anticipated that its work on the Z-10 military attack helicopter in China would open the door to a far more lucrative civilian helicopter market in China, which according to PWC estimates, was potentially worth as much as $2 billion to PWC.

Belated and False Disclosures to U.S. Government

These companies failed to disclose to the U.S. government the illegal exports to China for several years and only did so after an investor group queried UTC in early 2006 about whether PWC’s role in China’s Z-10 attack helicopter might violate U.S. laws.  The companies then made an initial disclosure to the State Department in July 2006, with follow-up submissions in August and September 2006.

The 2006 disclosures contained numerous false statements.  Among other things, the companies falsely asserted that they were unaware until 2003 or 2004 that the Z-10 program involved a military helicopter.  In fact, by the time of the disclosures, all three companies were aware that PWC officials knew at the project’s inception in 2000 that the Z-10 program involved an attack helicopter.

Today, the Z-10 helicopter is in production and initial batches were delivered to the People’s Liberation Army of China in 2009 and 2010.  The primary mission of the Z-10 is anti-armor and battlefield interdiction.  Weapons of the Z-10 have included 30 mm cannons, anti-tank guided missiles, air-to-air missiles and unguided rockets.

“PWC exported controlled U.S. technology to China, knowing it would be used in the development of a military attack helicopter in violation of the U.S. arms embargo with China,” said U.S. Attorney Fein.  “PWC took what it described internally as a ‘calculated risk,’ because it wanted to become the exclusive supplier for a civil helicopter market in China with projected revenues of up to two billion dollars.  Several years after the violations were known, UTC, HSC and PWC disclosed the violations to the government and made false statements in doing so.  The guilty pleas by PWC and the agreement reached with all three companies should send a clear message that any corporation that willfully sends export controlled material to an embargoed nation will be prosecuted and punished, as will those who know about it and fail to make a timely and truthful disclosure.”

“Due in part to the efforts of these companies, China was able to develop its first modern military attack helicopter with restricted U.S. defense technology.  As today’s case demonstrates, the Justice Department will spare no effort to hold accountable those who compromise U.S. national security for the sake of profits and then lie about it to the government,” said Assistant Attorney General Monaco.  “I thank the agents, analysts and prosecutors who helped bring about this important case.”

“This case is a clear example of how the illegal export of sensitive technology reduces the advantages our military currently possesses,” said ICE Director Morton.  “I am hopeful that the conviction of Pratt & Whitney Canada and the substantial penalty levied against United Technologies and its subsidiaries will deter other companies from considering similarly ill-conceived business practices in the future.  American military prowess depends on lawful, controlled exports of sensitive technology by U.S. industries and their subsidiaries, which is why ICE will continue its present campaign to aggressively investigate and prosecute criminal violations of U.S. export laws relating to national security.”

“… [These] charges and settlement demonstrate the continued commitment of the Defense Criminal Investigative Service (DCIS) and fellow agencies to protect sensitive U.S. defense technology from being illegally exported,” said DCIS Special Agent in Charge Bradley.  “Safeguarding our military technology is vital to our nation’s defense and the protection of our war fighters both home and abroad.  We know that foreign governments are actively seeking U.S. defense technology for their own development.  Thwarting these efforts is a top priority for DCIS.  I applaud the agents and prosecutors who worked tirelessly to bring about this result.”

“Preventing the loss of critical U.S. information and technologies is one of the most important investigative priorities of the FBI,” said FBI Special Agent in Charge Mertz.  “Our adversaries routinely target sensitive research and development data and intellectual property from universities, government agencies, manufacturers, and defense contractors.  While the thefts associated with economic espionage and illegal technology transfers may not capture the same level of attention as a terrorist incident, the costs to the U.S. economy and our national security are substantial.  Violations of the Arms Export Control Act put our nation at risk and the FBI, along with all of our federal agency partners, are committed to ensuring that embargoed technologies do not fall into the wrong hands.  Those who violate these laws should expect to be held accountable.  An important part of the FBI’s strategy in this area involves the development of strategic partnerships.  In that regard, the FBI looks forward to future coordination with UTC and its subsidiaries to strengthen information sharing and counterintelligence awareness.”

“Protecting national security is our top priority,” said Assistant Secretary of Commerce for Export Enforcement Mills.  “Today’s action sends a clear signal that federal law enforcement agencies will work together diligently to prevent U.S. technology from falling into the wrong hands.”

Assistant Secretary Shapiro, of the State Department’s Bureau of Political and Military Affairs, said, “Today’s $75 million settlement with United Technologies Corporation sends a clear message:  willful violators of U.S. arms export control regulations will be pursued and punished.  The successful resolution of this case is the byproduct of the tireless work of our compliance officers and highlights the relentless commitment of the State Department to protect sensitive American technologies from being illegally transferred.”