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16 min read

20 Case related to Export Controls

Picture of trucks at port ITAR export compliance

US v Zhen Zhou Wu-shipment of weapons-grade technologies

Zhen Zhou Wu and Yufeng Wei found themselves on the wrong side of the law when they were convicted for violating strict restrictions on the overseas shipment of weapons-grade technologies. Their charges included counts of conspiracy, filing false declarations, and making false statements in an immigration application. Wu received a sentence of 97 months in prison, while Wei was sentenced to 36 months. Despite their convictions, the duo appealed, arguing that the Arms Export Control Act (AECA) was unconstitutionally vague. Unfortunately for them, the Court of Appeals dismissed their argument, affirming that the regulatory framework was not unconstitutionally vague and that the defendants were well aware that they were in violation of the AECA.

However, the Court of Appeals did find that the district court had made errors in its jury instructions on two counts, which violated the defendants' Sixth Amendment right to a trial by jury. As a result, while most of the convictions were affirmed, two counts were vacated and remanded for resentencing.

The case also sheds light on the background of Wu and Wei, their business endeavors, and their knowledge of export restrictions. It also delves into the timing of the State Department's determination that the phase shifters were controlled by the Munitions List. The document explores the importance of establishing whether the defendants acted with the necessary mens rea (guilty mind) and committed the actus reus (guilty act) they were charged with. Furthermore, it emphasizes the significance of government designations and the role of the jury in determining whether the defendants violated regulations.

The case also addresses the unsuccessful arguments put forth by Wu and Wei. They claimed they did not need a license to export the converters, argued that the evidence was insufficient to prove the converters reached China, and contended that the instructional error on the Munitions List counts had a detrimental impact on the conspiracy count. Despite their efforts, these arguments were ultimately unsuccessful.

Lastly, the document discusses the conviction of Wei for immigration fraud and Wu's ill-fated attempt to represent himself in court. These additional elements add further complexity and intrigue to an already compelling case.

Electronic Frontier Foundation v Department of Commerce-intercepting or blocking communications

ITAR Compliance The case delves into a legal dispute between the Electronic Frontier Foundation (EFF) and the Department of Commerce (Commerce) regarding EFF's pursuit of records pertaining to the export of devices, software, or technology used for intercepting or blocking communications. Commerce, however, refused to release the records, citing Exemption 3 of the Freedom of Information Act (FOIA). The crux of the issue revolves around whether Exemption 3 allows Commerce to withhold information that is exempted from disclosure under the expired Export Administration Act (EAA) of 2001. Ultimately, the court ruled against Commerce, rejecting the agency's argument that a "comprehensive legislative scheme" authorized them to withhold the information. The court also differentiated this case from two others that Commerce referenced, noting that the EAA's expiration date was extended in those instances by the EAMCA. Additionally, the case delves into the dispute over whether the information qualifies for withholding under Exemptions 4 and 5. While Commerce argues that the information is both commercial and confidential, EFF counters that the agency has not provided sufficient detail to justify withholding. Furthermore, the document examines the adequacy of Commerce's search for records, ultimately concluding that the search was reasonable. As a result, the court orders the agency to reprocess EFF's FOIA request and provide a Vaughn index.

Du Daobin v Cisco Systems Inc-China's Golden Shield surveillance program

Du Daobin, Zhou Yuanzhi, and Liu Xianbin have initiated a legal action against Cisco Systems, Inc. and its CEO, John Chambers, invoking the Alien Tort Statute (ATS). According to the plaintiffs, Cisco played a role in the establishment of China's Golden Shield surveillance program, which is notorious for its use in identifying and torturing dissidents. However, the defendants counter that the court lacks personal jurisdiction over Chambers and request the dismissal of the case on various grounds. The proceedings were put on hold pending two Supreme Court rulings, which ultimately affected the validity of the ATS. The court is tasked with determining whether the plaintiffs have presented a prima facie case for personal jurisdiction and whether they have adequately stated a claim for relief. Ultimately, the court concludes that the plaintiffs have failed to establish personal jurisdiction over Chambers and that the political question doctrine prevents the court from adjudicating the merits of the ATS claims. Furthermore, the court does not rule on whether the ATS can be applied extraterritorially or if corporations can be held liable under the ATS, but it does find that the plaintiffs have not convincingly alleged that Cisco's actions had a significant impact on the perpetration of the alleged international law violations by the CCP.

Teton Historic Aviation Foundation v US Dept of Defense-DOD's previous sale of similar parts

The Teton Historic Aviation Foundation eagerly participated in a government auction organized by Government Liquidation, successfully securing surplus aircraft components through their bids. However, their excitement soon turned to disappointment when the Defense Reutilization and Marketing Service deemed certain parts as unreleasable. To compound their frustration, the Department of Defense implemented a new policy that severely limited the availability of equipment for sale, greatly reducing the number of parts that Teton could acquire. Despite their diligent efforts to negotiate with GL, the sale was ultimately canceled, prompting Teton to take legal action against the DoD and DRMS, challenging their policies and classification system. Initially, the district court dismissed the case citing a lack of standing. However, the Court of Appeals overturned this decision, asserting that Teton had the right to sue based on the Department of Defense's previous sale of similar parts and their potential future incentives to do so. Additionally, the court recognized that GL, acting as a pass-through for the Department's equipment sales, would likely sell the parts if they were released by the Department.

United States ex rel McGrath v Microsemi Corporation-qui tam lawsuit

Relator Mark McGrath, a former employee of WEDC, filed a qui tam lawsuit against his former employer and Microsemi Corporation, the company that acquired WEDC. McGrath alleges that the defendants violated the False Claims Act (FCA) by submitting payment claims for the shipment of components protected by the International Traffic in Arms Regulation (ITAR) and Export Administration Regulations (EAR), without adequately safeguarding technical data from acquisition by foreign nationals. In response, the defendants sought to have the case dismissed for lack of a valid claim.

The case delves into the legal standards governing the FCA and the requirements for a complaint to withstand dismissal. It explores various theories of FCA liability, including factual falsity, worthless products, and false certification. Ultimately, the court determines that McGrath has not sufficiently alleged a factually false certification claim based on worthless products.

Additionally, the case examines the four essential elements of an implied false certification claim and argues that McGrath has failed to adequately allege any of them. The court concludes that ITAR compliance is not a condition of payment in this particular case and notes McGrath's failure to reference any statute, rule, regulation, or contract that links payment to ITAR compliance. Furthermore, the court asserts that McGrath has not sufficiently alleged an actual violation of ITAR.

The court also addresses the issue of materiality and the requirement for the plaintiff to provide specific details regarding the submission of false claims. Ultimately, the court finds that McGrath has not adequately pleaded any of the elements of an implied false certification claim and determines that allowing an amendment would be futile.

While the court denies the defendants' request for oral argument, it permits the incorporation of two documents by reference. Ultimately, the court dismisses the case with prejudice.

Epsilon Electronics Inc v United States Department of the Treasury-OFAC imposed penalty of $4,073,000

Epsilon Electronics, Inc. has taken legal action against the United States Department of the Treasury, specifically the Office of Foreign Assets Control (OFAC), in response to a hefty civil monetary penalty of $4,073,000. OFAC imposed this penalty on Epsilon for allegedly violating US economic sanctions by exporting goods to Iran. The dispute originated when OFAC discovered a shipment made by Power Acoustik, a brand of Epsilon, to Tehran, Iran in 2008. In January 2012, OFAC issued a cautionary letter to Power Acoustik, warning them about potential penalties for future violations. However, OFAC later uncovered evidence suggesting that Epsilon had received wire transfers from Asra International Corporation, LLC, which raised suspicions that these funds were intended for products destined for Iran. During the investigation, OFAC found records of 41 sales between 2008 and 2012, five of which occurred after the cautionary letter was issued. OFAC deemed these violations as "egregious" and concluded that Epsilon had "reason to know" that the goods were intended for Iran. Despite Epsilon's denial of any knowledge regarding the shipment of goods to Iran, OFAC maintained their findings and penalties from the pre-penalty notice. The court ruled in favor of OFAC, granting their motion for summary judgment and denying Epsilon's motion. The court deemed OFAC's determinations as reasonable, and it was determined that these determinations did not infringe upon Epsilon's due process or Eighth Amendment rights. Furthermore, the court discussed the standard of review for cases seeking judicial review of agency action, the principles of judicial review, and the deference given to the agency in matters of foreign relations. Additionally, Epsilon's argument that Asra International conducted business in countries other than Iran was addressed, along with OFAC's guidelines for determining "egregious" violations.

Epsilon Electronics Inc v United States Department of Treasury-knowledge of client's intent to re-export 

In the case of Epsilon Electronics, Inc. v. United States Department of Treasury, Epsilon faced accusations of violating economic sanctions on Iran by shipping equipment to a client in Dubai. The Office of Foreign Assets Control (OFAC) determined that Epsilon had knowledge of the client's intention to re-export the equipment to Iran. Epsilon, however, argued that OFAC needed to prove that the goods actually reached Iran. The Court of Appeals ruled that Epsilon could be held liable based on its knowledge or reason to know that the client intended to re-export the goods. However, the Court of Appeals also found that OFAC failed to adequately explain certain aspects of its determination, particularly regarding the last five shipments. Epsilon's argument regarding the safe harbor provision in section 560.204 was also unsuccessful. The Court of Appeals partially affirmed and partially reversed the district court's decision, sending the case back to OFAC for a reevaluation of the penalty. The majority opinion asserted that the regulation in question was not ambiguous, while the dissenting opinion argued for further clarification from the agency.

Neblett v Brothers-adverse interest exception

This case delves into the legal battle of Neblett v. Brothers, where a bankruptcy trustee takes on suppliers of a technology company. The trustee accuses the suppliers of engaging in civil conspiracy, aiding and abetting a breach of fiduciary duty, and displaying negligence in their dealings with the technology company. However, the court delivers a summary judgment in favor of the suppliers, ruling that the trustee cannot succeed in any of these claims. Moreover, the court invokes the in pari delicto doctrine to dismiss the trustee's claims and determines that the "adverse interest" exception does not apply. The case sheds light on the background of the technology company, Valley Forge, and its suppliers, Avnet and Xilinx, providing an insight into the transactions between them and the tactics employed by Valley Forge to conceal the export of microchips to China.

United States v Royal Pearls General Trading-alleged exporting petroleum parts to Iran

This case centers around a memorandum opinion issued by Judge Reggie B. Walton of the United States District Court, District of Columbia. It involves a civil forfeiture action that aims to seize $396,589 in U.S. funds associated with Royal Pearls General Trading. The government alleges that Royal Pearls, along with PT Petro, MKS International Group, and Kambiz Rostamian, engaged in an unlawful scheme to export petroleum parts to Iran. PT Petro wired the defendant funds to National Oilwell Varco as payment. The court thoroughly examines its authority to grant default judgment, the procedural requirements for forfeiture, and the government's argument justifying its entitlement to the funds. Additionally, the court thoroughly explores the government's efforts to notify potential claimants of the forfeiture action and ultimately determines that these efforts were sufficient. Ultimately, the court grants the government's motion for default judgment, ordering the forfeiture of the defendant funds to the government. The court finds that the funds are subject to forfeiture under two different sections of the U.S. code and concludes that the government's complaint and notices meet the requirements outlined in Rule G.

United States v Sterling Islands Inc-"contrary to law" provision

In the case of United States v. Sterling Islands, Inc., which took place in 2019 in the United States District Court in New Mexico, the United States accused Sterling Islands, Inc., Al-Zuni Global Jewelry, Inc., and several individuals of conspiring to defraud the country by illegally smuggling goods into the country. The specific allegation against the defendants is that they imported Native American-style jewelry, arts, and crafts from the Philippines without the legally required indelible markings, and falsely claimed that the jewelry was made by Native American artists.

In response, the defendants filed a motion to dismiss the indictment, arguing that the Treasury Department regulation mandating the indelible markings should not be considered a "law" for the purposes of the federal smuggling statute. They also argued that the rule of lenity should be applied, and that the court should follow the precedent set by the Tenth Circuit rather than the Fourth Circuit. Additionally, the defendants contended that the regulation in question is exclusively civil, and that they could not have reasonably been aware of the possibility of criminal prosecution.

The United States countered these arguments, asserting that the regulation does qualify as a "law" for the purposes of the federal smuggling statute, and that the rule of lenity should not be applied. Furthermore, the United States argued that the statutes and regulations in question work together to establish an effective punishment system.

Ultimately, the District Court ruled against the defendants, concluding that the Treasury Department regulation does indeed qualify as a "law" for the purposes of the federal smuggling statute. The court based its decision on various precedents, including interpretations of other sections of the U.S. code and different interpretations of the "contrary to law" provision by other circuit courts. In essence, the court determined that all statutes and agency-promulgated regulations should be considered "laws" for the purposes of the federal smuggling statute, and thus the regulation in question fits this definition. As a result, the motion to dismiss was denied.

United States v Chi-bribery of a public official

In the case of United States v. Chi, the focus is on the conviction of Heon-Cheol Chi, a prominent researcher and director at the Korea Institute of Geoscience and Mineral Resources (KIGAM). Chi faced six counts of violating 18 U.S.C. § 1957 for his involvement in soliciting and receiving payments from two seismometer manufacturers. These payments were made in exchange for Chi's influence in ensuring that KIGAM purchased their products. The FBI initiated an investigation after Chi requested the companies to route the payments through a U.S. bank account. Chi contended that the district court misinterpreted the definition of "bribery of a public official." However, the Court of Appeals determined that the South Korean statute, which prohibits public officials from accepting bribes, could indeed be classified as an offense involving "bribery of a public official." Additionally, the Court of Appeals concluded that there was sufficient evidence to support Chi's conviction, ultimately affirming it.

Washington v United States Department of State-3-D printed firearms

The case at hand delves into the legal dispute of Washington v. United States Department of State, which revolves around the regulation of technical data related to 3-D printed firearms. The relevant legislation in question includes the Arms Export Control Act (AECA) and the Export Control Reform Act (ECRA). This case stems from a lawsuit filed by Defense Distributed, a private company, against the US Department of State, asserting that the government's prepublication approval requirements under ITAR were unconstitutionally applied to their speech regarding firearms. The government, on the other hand, argues that exporting certain 3-D gun files from Defense Distributed could pose a threat to US national security and foreign policy interests. The district court initially denied Defense Distributed's motion for a preliminary injunction, a decision which was affirmed by the Fifth Circuit. Currently, seventeen states are challenging the companion regulations issued by the Department of State and the Department of Commerce, contending that these regulations violate the Administrative Procedure Act (APA). The District Court determined that the states have the legal standing to bring the action, that the political question doctrine does not prohibit the action, and that the ECRA does not exempt the final rules from judicial review under the APA. Furthermore, the court found that the states are likely to succeed in their claims on the merits. The court also extensively discussed the State Department's decision to remove certain 3-D gun files from the Munitions List, the applicability of the APA's foreign affairs exemption, the notice-and-comment requirement, and whether the federal defendants complied with these procedures. Ultimately, the court ruled that the decision to remove 3-D gun files from the Munitions List was arbitrary and capricious, constituting a violation of the APA. After analyzing factors such as irreparable harm, the balance of equities and the public interest, as well as the scope of relief, the court granted the states' motion for a preliminary injunction in part.

United States v Singer-International Emergency Economic Powers Act

In the case of United States v. Singer, Bryan Evan Singer found himself facing conviction for his attempt to export high-speed communications modems to Cuba without the necessary license, thereby violating the International Emergency Economic Powers Act (IEEPA). Singer, however, appealed the decision, claiming that there was insufficient evidence to support his conviction. Nonetheless, the Court of Appeals ruled in favor of the government, upholding Singer's conviction. The court determined that the government had successfully proven that Singer was aware of the export licensing regulations applicable to the modems and that he did not possess the required license at the time of his intended export. Furthermore, the court concluded that Singer had taken significant steps towards exporting the modems to Cuba without the necessary license. Additionally, the court dismissed Singer's challenge to the application of a two-point obstruction-of-justice Sentencing Guidelines enhancement, deeming his false statements as crucial to the case. Ultimately, the court affirmed Singer's conviction and sentencing.

Federal Express Corporation v US Department of Commerce-Export Control Reform Act of 2018 (ECRA)

FedEx, the renowned shipping corporation, has taken legal action against the U.S. Department of Commerce, raising substantial concerns regarding the Export Administration Regulations (EAR). In their lawsuit, FedEx alleges that these regulations not only violate the Due Process Clause of the Fifth Amendment but also exceed the Department's authority as outlined in the Export Control Reform Act of 2018 (ECRA). The company argues that the export controls imposed by the EAR impose burdensome restrictions on their shipping operations. However, the Department has moved to dismiss the case, prompting a legal battle. Ultimately, the District Court ruled in favor of the Department, affirming that the EAR's export controls are justifiably linked to national security and foreign policy interests. Furthermore, the Court delved into FedEx's claim of ultra vires, concluding that the EAR does not contradict the ECRA. Additionally, the Court determined that the Department's implementation of aiding and abetting liability does not constitute a blatant misinterpretation of the statute, dismissing FedEx's objection.

Washington v United States Department of State-Control Act and Reform Act

The case at hand delves into the legal battle of Washington v. United States Department of State, where 22 states and the District of Columbia have filed a lawsuit against the Department of State and Department of Commerce, alleging violations of the Administrative Procedure Act. The plaintiffs have challenged the final rule by the Department of State, which removes 3-D printed firearms and their associated electronic files from the designation as defense articles, as well as the final rule by the Department of Commerce, which assumes regulatory jurisdiction over these items. Initially, the district court granted a preliminary injunction, but the Court of Appeals overturned this decision and sent the case back to be dismissed. The Court of Appeals held that the Control Act and Reform Act prevent judicial review of the final rules. In addition, the case delves into the public response to the proposed rule changes, the dissenting argument that the Control Act does not grant authority to the President, and the majority's rejection of this argument. Judge Robert H. Whaley dissented, asserting that the majority's interpretation of the statute lacked clarity and persuasiveness, and that the final rule by the Department of State was arbitrary and capricious.

Changji Esquel Textile Co Ltd v Raimondo-placement on the "Entity List"

Changji Esquel Textile Co. Ltd. has filed a lawsuit against the United States Department of Commerce, its Secretary, the Bureau of Industry and Security (BIS), and specific BIS officers after being placed on the "Entity List." This designation severely limits Changji's ability to receive items that fall under the Export Administration Regulations (EARs). Changji argues that the defendants exceeded their authority, violating the Administrative Procedure Act (APA) and the Fifth Amendment of the United States Constitution. However, the defendants maintain that they acted within their authority under the Export Control and Reform Act (ECRA), which empowers them to include entities on the "Entity List" for various reasons, including human rights violations. Ultimately, the court sided with the defendants, determining that they did not overstep their authority. Changji's request for a preliminary injunction was also denied, as the court deemed it unlikely that the company would succeed in their claims.

Rang Dong Joint Stock Company v JF Hillebrand USA Inc-forum-selection clause

Rang Dong Joint Stock Company initiated legal proceedings against J.F. Hillebrand USA, Inc. and Blue Eagle Consolidation Services over damages incurred during the transportation of goods by sea. Blue Eagle responded by seeking the dismissal of the case, citing a forum-selection clause contained in the contract between the two parties. Rang Dong disputed the existence of such a clause in their contract, asserting that the bill of lading did not include it. In contrast, Blue Eagle contended that the clause was indeed present in the bill of lading, and that Rang Dong had agreed to the rate agreement, which adhered to the required regulations. The court interpreted Blue Eagle's motion as a request for dismissal based on forum non conveniens and ultimately granted the motion after analyzing the validity of the contract provision and determining that Rang Dong had willingly accepted it, while also concluding that Blue Eagle had adequately communicated the forum-selection clause to Rang Dong.

Federal Express Corporation v United States Department of Commerce-aiding and abetting violations

FedEx, the renowned shipping corporation, is currently engaged in a legal battle against the Department of Commerce. The company is challenging the Department's authority to hold it strictly liable for aiding and abetting violations of the 2018 Export Controls Act. This Act regulates the export of items that have sensitive military, national security, intelligence, and foreign policy implications. FedEx argues that the Department's interpretation of its causing, aiding, or abetting regulation to apply strict liability is not in line with its regulatory authority under the Act. However, the district court dismissed FedEx's complaint and the Court of Appeals affirmed this decision. They held that the Department's interpretation did not exceed its authority and that it provided fair notice to the public of its strict liability interpretation. The Court of Appeals also rejected FedEx's constitutional avoidance argument, stating that the regulation satisfies the fair notice requirement. Ultimately, the court concluded that FedEx's challenge lacked merit, considering the interpretation of the regulation, circuit precedent, and the longstanding omission of a mens rea requirement. The court also discussed the different approaches taken by jurisdictions regarding knowledge or intent in aiding and abetting violations. It emphasized the Department of Commerce's discretion in factoring culpability into the penalty calculation.

United States v Shih-rated for operation

The United States v. Shih case delves deep into the conviction of the defendant for a wide range of offenses related to the export of semiconductors to China. It provides a comprehensive account of the Export Administration Regulations (EARs) and the International Emergency Economic Powers Act (IEEPA), both of which play a critical role in regulating exports for national security purposes. This case sheds light on the intricate process undertaken by Shih and his associate, Kiet Mai, as they engaged in the acquisition of MMIC foundry services from Cree, Inc. and allegedly shipped the MMICs to China. Furthermore, it delves into the constitutional aspects of the EARs, exploring the interpretation of the term "rated for operation" within the EARs. Shih also contends that the district court erred in neglecting to instruct the jury on the fundamental research exemption. Moreover, the case delves into the evidentiary rulings made by the district court, including the admission of boxes containing MMICs, a personnel file, internal emails, and YouTube videos. Additionally, it addresses the admissibility of expert testimony from Peter Mattis. The sufficiency of evidence supporting Shih's conviction, as well as the validity of the wire and mail fraud instructions, and the violation of the EARs, computer fraud, and money laundering charges are also examined. Finally, the document touches on the Classified Information Procedures Act and the concept of cumulative error.

Defense Distributed v Platkin-should digital firearms information  be considered protected speech

Defense Distributed (DD) and Second Amendment Foundation, Inc. (SAF) initiated legal action against New Jersey Attorney General (NJAG) Matthew J. Platkin, arguing that a statute prohibiting the dissemination of digital instructions for 3D-printed firearms violated their constitutional rights. The plaintiffs contended that the statute infringed upon their First and Second Amendment rights, as well as their rights under the Equal Protection and Due Process Clauses of the Fourteenth Amendment, and the dormant Commerce Clause. In response, the NJAG filed a motion to dismiss the case for failure to state a claim, which was ultimately granted by the District Court. The court dismissed some counts of the lawsuit without prejudice and others with prejudice. It concluded that the plaintiffs had not provided sufficient evidence to support their claim that digital firearms information should be considered protected speech, and that they had also failed to establish standing to challenge the statute under the Second Amendment. Additionally, the court found that the plaintiffs had not adequately proven selective enforcement under the Equal Protection Clause of the Fourteenth Amendment. Furthermore, the court ruled that the statute was not unconstitutionally vague, did not violate the dormant Commerce Clause, and was not preempted by federal regulations governing technical data under the Arms Export Control Act (AECA). The court also determined that the NJAG had not waived Eleventh Amendment immunity.

The background of the case includes multiple instances of DD publishing digital firearms information on their website, DEFCAD, with varying levels of access restrictions, the NJAG's efforts to prevent DD from disseminating this information, and the passage of the Challenged Statute in New Jersey. The court also referenced previous cases, such as the First Texas Case and the First Washington Case, to provide additional context to the legal disputes surrounding the distribution of digital firearms information. Moreover, the court analyzed whether computer code is protected by the First Amendment, highlighting the distinction between expressive and functional computer code. Ultimately, the court concluded that the plaintiffs had not presented enough evidence to make a determination on this matter. The court did not address the plaintiffs' arguments regarding prior restraint or overbreadth and dismissed the Second Amendment claim due to lack of standing. Additionally, the court dismissed the claim of selective enforcement due to lack of evidence. The court also rejected the plaintiffs' claims of due process violations, finding that the statute was not unconstitutionally vague and that the plaintiffs had failed to establish standing. Furthermore, the court determined that the statute did not violate the dormant Commerce Clause. Regarding the Challenged Statute, the court ultimately concluded that it does not contravene the dormant Commerce Clause. Additionally, the court held that the Challenged Statute is not preempted by the AECA or the Communications Decency Act (CDA). The court reasoned that the CDA did not apply to the case, as the content in question originated from DD itself. Furthermore, the court dismissed the plaintiffs' claims of tortious interference based on sovereign immunity.