Michael Burnett

Regional Export Control Officer

American Embassy Abu Dhabi

U.S. Export

Enforcement Examples

2

Proliferators Attack Export Control Weaknesses

Supplier Agent/ Broker

• Some suppliers willing to export illegally, out of ignorance, for economic reasons, or to provide clandestine assistance

• Inaccurate or vague commodity descriptions on documents complicate enforcement

• Agents or brokers of foreign procurement networks obtain goods, often with circuitous buying patterns, and ship without license

• They disguise or falsify the final recipient country and/or the end user

• They exploit countries with ineffective export controls or other loopholes

• Intermediate consignees divert shipments in transit (typical smuggling tactics)

• They might use small companies or even universities to acquire facilities, equipment, technology and training

• They often use cover

names and front companies to divert items to unknown ultimate end-users

• Illegal weapons end-users purchase dual-use or uncontrolled commodities, in addition to targeted items, to hide their weapons procurements

• They provide false or misleading end- use statements on documents or on websites to disguise their weapons activities

Intermediate

Consignees End User

Export Control Investigations Regional Trends

• Use of Third Parties – Avoid Detection/Conceal Identity

• Circuitous Routing (unnecessary stops)

• Documents Trail – End-User Statements

– Shipping /Customs

– Invoices

– Emails

– Financial Transactions

Burden of Proof

1. An Export / Re-export, Conspiracy to Export / Re-export or Attempted Export / Re-export occurred.

2. Of a licensable article/ service or technical data and

3. No License was obtained.

4. Knowledge – The exporter had knowledge of the United States export laws & regulations.

Specific Intent or Willfulness – the exporter intentionally or willfully caused the export to occur in violation of United States export laws & regulations.

Joint Investigation Case Study:

ARC International, LLC

Case Background

Initiated from MicroPilot to the Canadian Department of Foreign Affairs and International Trade (DFAIT)

DFAIT to the U.S. Department of State

Department of State to the Department of Commerce, Office of Export Enforcement

Lead to OEE’s SAC Washington field office

OEE/FBI initiate joint investigation

Dual-Use Commodity In Question

Model MP2028s are autopilots designed for use in Unmanned Aerial Vehicles (UAV)

MP2028s are controlled in Canada’s Export Control List under 1-9.A.12.B

This entry corresponds directly to U.S. Commerce Control List and ECCN 9A012.b.2

Canada and U.S. require export license authorization for export to the People’s Republic of China

No License/Permit required for export from Canada to

the United States

Commodity (Cont)

,LIV1CroPilol:fr World Leaders in Small UAV Autopilots

www.micropilot.com

info@micropilot.com

+1.204.344.5558

Copyright 2004 MicroPiot

MP2028g

Miniature UAV Autopilot

FEATURE RICH

world's smallest UAV autopilot; 28 grams, 4 tin by 10 cm

GPS waypoint navigation with altitude

and airspeed hold

completely independent operation including autonomous takeoff, bungee launch, hand launch and landing

powerful command set

fully integrated with 3-axis gyros / accelerometers, GPS, pressure altimeter, pressure a irspeed sensors, at on a single circuit board

extensive ata logging and telemetry collects the data you need

UAV configuration wizard and installation video simplifies setup and speeds time to market

includes HORIZON"' ground control sotwa re

Case Time Line

July 16, 2008 – MicroPilot exports 20 MP2028s to ARC International, located in the

United States

July 27, 2008 - Harold Hanson reports the shipment as missing

August 22, 2008 – MicroPilot receives request for

technical support from Chinese company

October 5, 2008 – OEE and FBI initiate a joint investigation

Investigative Actions

• Federal search warrants authorized to obtain additional information.

• Search warrant executed on the business address

of ARC International produces information

suggesting actual UAV end-use • Interviews of Defendants Harold Hanson and

Nina Hanson produce additional information

regarding location of autopilots.

U.S. Subjects (Harold and Nina Hanson, a.k.a ARC international)

Questions about End-Use

Chinese End-user claimed the MP2028s were

for use in flying model aircraft

Defendant Harold Hanson later claimed that MP2028s were for: – use in flying model jet aircraft

– use in UAVs for thunderstorm/tornado research

– use in UAVs for recording ice pack melt in the Arctic

Xi’an XiangYu End-Use

• “Xi’an XiangYu Company is a civil

aviation repair station and flying club which

is founded at 1995 and located in Xi’an city.”

• “All the MicroPilot autopilots we intended

to purchase will be only installed on model

airplanes....”

• “Our entire model airplanes would not be

used for military purposes....”

Information from Search Warrant

UAV will play the key role in the future war

Used for battlefield reconnaissance, taking picture, electro-antagonize, anti-radiancy and long distance attack.

Used for minefield survey, artillery fire adjustment, battle damage assessment, battlefield management, communication and data relay, digital mapping, flight route reconnaissance, nuclear weapon exploring, psychological warfare, electron warfare, radar disturbing suppressing, target acquisition, and city warfare.

Used for physical geography mapping, atmospheric scientific research, forest fire prevention, paddy cultivation tasks and various civil applications.

To be one of main important arming for reconnaissance, surveillance and target acquisition in the battle of Anti-terrorism.

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Sentencing

March 12, 2009: Grand Jury Indictment –Title 50 USC 1701-1705 (Export Violations)

–Title 18 USC 371 (Conspiracy)

–Title 18 USC 1001 (False Statements)

November 2009: Harold Hanson and Ya Ming Hanson pleaded guilty in Federal Court

February 2010: Both individuals sentenced

Thank You!

Michael Burnett

Regional Export Control Officer

Foreign Commercial Service (FCS)

American Embassy Abu Dhabi, UAE

+971 (0)2 414-2304 (Office)

+971 (0)2 414-2228 (Fax)

Michael.Burnett@trade.gov

Information from Search Warrant

1. UAV will play the key role in future war

2. Main military countries multiple devote to UAV

3. Foreign countries UAV status and the trend of

UAV development

4. Huge Potential of domestic UAV market

Emails

Key Point s for Investment

Now company established R4D Center and Production Base are located at Chang'an

industrial Park. The base occupy 43 mu-with

the constructional space 25000 square meter

• Intend to invest for occupying the capability to manufacture UAV 300-500 flights per year. In two years, we will be the biggest UAV R&D and Production Base in China.