Opinion ID: 855577
Heading Depth: 3
Heading Rank: 2

Heading: Commerce Control List (CCL) Counts

Text: On the Commerce Control List (CCL) counts, Wu and Wei were convicted on charges that they exported dual-use electronic components to China repeatedly between May 2004 and May 2007. As with the Munitions List counts, Wu and Wei challenge the jury instructions, although they also argue that their conduct was perfectly legal under the relevant regulations and that there was insufficient evidence for the jury to conclude otherwise. Statutory and Regulatory Framework. The International Emergency Economic Powers Act (IEEPA) imposes criminal penalties specifically within its ambit, see id. at 70,963, and so, if finalized, it would permit the government to prosecute future exporters without proving anew each time that phase shifters are within the scope of the Munitions List. 12 Because we vacate the Munitions List convictions on the grounds that the district court's charge improperly wrested the actus reus question from the jury, we do not reach the defendants' argument that the jury instructions with respect to the mens rea element were fatally flawed. According to the district court's instructions, the jury could find that the mens rea element of the Munitions List counts had been met if the defendants willfully made themselves blind to th[e] fact that phase shifters were defense articles on the Munitions List. Wu and Wei argue that allowing them to be convicted on the basis of willful blindness improperly lowered the mens rea requirement in § 2778(c). See generally United States v. Roth, 628 F.3d 827, 834 (6th Cir. 2011) (noting that circuits have interpreted the willfulness element of section 2778(c) and produced different results, and compiling cases), cert. denied, 132 S. Ct. 94 (2011). -33- on any person who willfully commits . . . or willfully conspires to commit a violation of regulations issued under the Act. 50 U.S.C. § 1705(c). The IEEPA's penalty provision applies to violations of the Export Administration Regulations (EAR), 15 C.F.R. pts. 730-774. See generally United States v. Zhi Yong Guo, 634 F.3d 1119, 1121-22 (9th Cir.), cert. denied, 131 S. Ct. 3041 (2011). Five provisions of the EAR are especially relevant to this case. First, the CCL describes items that are subject to the EAR and assigns Export Classification Control Numbers (ECCNs) to various categories of commodities, software, and technology. See 15 C.F.R. § 774.1 & Supp. No. 1. The CCL covers dual use items, i.e., items that have commercial as well as military applications. See id. § 730.3; Micei Int'l v. Dep't of Commerce, 613 F.3d 1147, 1150 (D.C. Cir. 2010). Second, the Commerce Country Chart, 15 C.F.R. pt. 738 Supp. No. 1, assigns countries to various categories based on the risk that exports to those countries will pose a threat to U.S. national security or other vital interests. Even though Hong Kong has been a special administrative region of the People's Republic of China since 1997, Hong Kong and China are categorized differently for EAR purposes. Hong Kong is subject to NS Column 1 controls (as is every other country except Canada), while China is subject to NS Column 1 and NS Column 2 controls. -34- Third, the EAR's General Prohibition One, id. § 736.2(b)(1), prohibits the export and reexport of controlled items to certain countries without a license or license exception. The application of General Prohibition One depends on the Export Classification Control Number of the item in question and the Commerce Country Chart category of the country of destination. For example, electronic components in the ECCN 3A001 category cannot be exported or reexported to NS Column 2 countries without a license or license exception (although they may, in general, be exported or reexported to NS Column 1 destinations). Fourth, a section titled Important EAR terms and principles, id. § 734.2, defines the words export and reexport for purposes of the regulations. Most importantly, the so-called deemed export provision in that section states that: For purposes of the EAR, the export or reexport of items subject to the EAR that will transit through a country or countries or be transshipped in a country or countries to a new country or are intended for reexport to the new country, are deemed to be exports to the new country. Id. § 734.2(b)(6). Fifth, and finally, a section titled Additional permissive reexports (APR), id. § 740.16, allows unlicensed reexports of certain items from cooperating countries (a category that includes Hong Kong) to destinations in Country Group D:1 (a -35- category that includes China). Id. § 740.16(a); see also id. pt. 740 Supp. No. 1. The items at issue here are digital-to-analog and analogto-digital converters. While such converters are used in ordinary audio and video players and cell phones, Wu and Wei allegedly exported converters that were rated for operation over an ambient temperature range of minus 55 degrees Celsius (minus 67 degrees Fahrenheit) to 125 degrees Celsius (257 degrees Fahrenheit)--specifications more consistent with military systems than with household electronic appliances. CCL Jury Instructions. Wu and Wei's first argument for vacating the CCL convictions is similar to the challenge that they raise to the Munitions List counts: an ex post facto determination by a government official that the items at issue fall within the relevant export control category cannot substitute for a jury finding that, at the time of export, the items were subject to license requirements. However, the concerns about ex post facto lawmaking that control our analysis of the Munitions List counts do not lead to the same conclusion here. By the time of the first converter shipment charged in the indictment (May 8, 2004), analog-to-digital and digital-toanalog converters rated for operation in the ambient temperature range of -55 degrees Celsius to 125 degrees Celsius were already listed on the CCL and assigned an Export Classification Control -36- Number of 3A001, meaning that they were subject to NS Column 2 controls and could not be exported to China without a license. See 15 C.F.R. pt. 774 Supp. No. 1 (2003); Implementation of the Wassenaar Arrangement List of Dual-Use Items, 65 Fed. Reg. 43,130, 43,135 (July 12, 2000). The items allegedly exported on May 8, 2004--sixty Intersil digital-to-analog converters with part number CA3338AD--clearly fall within the scope of the Commerce Control List's ECCN 3A001 category; one can ascertain as much by comparing the ordering information provided by the manufacturer with the relevant regulation. Compare Intersil Corp., CA3338, CA3338A (File No. 1850.2), at 10-11 (Aug. 1997) (stating that the temperature range for part number CA3338AD is -55 degrees Celsius to 125 degrees Celsius), with 15 C.F.R. pt. 774 Supp. No. 1. At trial, an expert witness from the Commerce Department walked the jury through the steps involved in determining whether a particular part requires a license for export under the CCL, and the government presented a chart summarizing the results of the expert's analysis with respect to other charged parts. Cf. Fed. R. Evid. 1006 (admissibility of summary or chart to prove content of voluminous records). Wu and Wei give us no cause to doubt any of these determinations. Here, the district judge properly instructed the jury that to meet its burden with respect to the CCL counts, the government had to prove beyond a reasonable doubt that the charged -37- item was classified with an Export Control Classification Number 3A001 of the Commerce Control List at the time it was exported. But the district judge followed this up by saying: You should not consider the appropriateness of the determinations made by the Department of Commerce. You may only consider whether the government has proven beyond a reasonable doubt that the Secretary of Commerce determined that the charged parts fell within the ECCN of the Commerce Control List. Wu and Wei argue that the last sentence of the abovequoted instruction improperly wrested a question of fact from the jury under the circumstances of the case. If the underscored sentence referred to the Commerce Department's ex post determination--issued as part of the Chitron investigation--that the charged parts fell within ECCN 3A001, then we would agree. An ex post determination does not substitute for a finding from the trier of fact that at the time of the alleged exports--based on then-existing regulations--the charged parts fell within the relevant CCL category. But that does not resolve the matter. As we have noted, the harmless error standard applies to instructional errors, see Neder, 527 U.S. at 17, and here, Wu and Wei have not explained how they were prejudiced by the instructional error. It is uncontested that the items described in the indictment carried specifications that placed them squarely within the ECCN 3A001 category. Wei's appellate brief says that whether these parts were controlled by -38- the CCL was a contested issue, but the record appendix page numbers cited do not support this claim. Wu and Wei do not argue, for example, that the charged items were not analog/digital converters or that the converters were incapable of operating over the ambient temperature ranges for which they were rated. So although the question of whether the items at issue fell within ECCN 3A001 at the time of the alleged export should have been submitted to the jury, we are confident that a properly instructed jury would have answered that question in the affirmative. Accordingly, under Neder, we conclude that the error was harmless. Rejection of Defense of Additional Permissive Reexport (APR) Exception. Wu and Wei also argue that as they read the license exception for additional permissive reexports (APRs), no license was required when the controlled converters were exported to Hong Kong and then reexported to China. We dispose of this argument rather easily, as the argument is based on a misreading of the APR provision. That provision only applies to [r]eexports from nations in Country Group A:1 and cooperating countries. 15 C.F.R. § 740.16(a) (emphasis added). (Hong Kong is a cooperating country. Id. pt. 740 Supp. No. 1.) At most, the APR provision exempts Hong Kong-based merchants from U.S. licensing requirements when they import items from the United States and reexport those items to China. But Chitron-US was not a reexporter; it was an exporter. And the APR provision simply does not speak to the -39- question of whether an exporter needs a license when it ships listed items abroad. The Commerce Department first promulgated the APR provision as part of an effort to simplify, clarify, and make the [Export Administration Regulations] more user-friendly. Simplification of Export Administration Regulations, 61 Fed. Reg. 12,714 (Mar. 25, 1996). One can see how the APR exception might advance this objective. For instance, in the case of items that fall within ECCN 3A001, the exporter already must obtain a license before shipping such items to a freight-forwarder or other middleman in an NS Column 1 country (e.g., Hong Kong) when the items are intended for reexport to an NS Column 2 country (e.g., China). See 15 C.F.R. § 734.2(b)(6). Under such circumstances, it would be duplicative to require that the freightforwarder or reexporter in the NS Column 1 country also apply for an additional license before proceeding with the contemplated transaction. But although the APR provision provides a license exception for the overseas freight-forwarder or reexporter, it does not relieve the U.S.-based exporter of the burden of complying with the EAR. If it did, then the APR provision would allow exporters to evade EAR requirements by routing shipments through countries subject to looser controls. Cf. Lachman, 387 F.3d at 52 (rejecting defendant's proposed interpretation of export controls -40- where it would permit easy evasion of the regulation). By their very terms, the deemed-export provision and the APR license exception address different classes of merchants: the former is directed to those such as Chitron-US who export controlled items from the United States with the intention that the items will be reexported to a particular prohibited destination, while the latter grants relief to overseas merchants who may sometimes deal in parts of U.S. origin.13 Sufficiency of the Evidence. In the alternative, Wu and Wei argue that even if a license was required for the shipment of controlled converters to China via Hong Kong, the evidence presented at trial was insufficient to show that the converters actually reached China. Our review is de novo, viewing the 13 In a futile attempt to complicate matters, the defendants draw our attention to a separate subsection of the APR, 15 C.F.R. § 740.16(i), which applies only to Sudan. That subsection allows for reexports of certain controlled items to Sudan but adds a clarification: However, the export from the United States to any destination with knowledge that [the controlled items] will be reexported directly or indirectly, in whole or in part to Sudan is prohibited without a license. The defendants claim that the clarification would be superfluous unless the APR already allowed the export of controlled items from the United States with the knowledge that those items would be reexported to a listed country. But the fact that the drafters of the APR included an extra clarification in the Sudan subsection does not alter the plain meaning of the rest of the APR's text. Where drafters include a clarification as a means of reminding those subject to the new laws of . . . self-operative, previously enacted sanctions, the clarification necessarily establish[es] no more than that [the drafters] chose in some cases to make assurance doubly sure. United States v. Hansen, 772 F.2d 940, 946-47 (D.C. Cir. 1985) (Scalia, J.), cert. denied, 475 U.S. 1045 (1986). -41- evidence in the light most favorable to the verdict and reversing only where no rational factfinder could have concluded that the evidence presented at trial, together with all reasonable inferences, established [this] element of the crime beyond a reasonable doubt. United States v. Green, 698 F.3d 48, 56 (1st Cir. 2012) (internal quotation mark omitted), cert. denied, 2013 U.S. LEXIS 1942 (Mar. 4, 2013). Here, there was ample evidence to support the jury's finding. Specifically: -Sales spreadsheets in Wu's possession at the time of his arrest indicated that the converters in question were destined for customers whose listed addresses were in China; -Three Chitron-US employees testified that once parts reached Hong Kong, they were forwarded to a Chitron office in Shenzen, China; -Chitron-US brochures said that the company's sole distributor was based in Shenzen; -Wu said on his resume that as President of Chitron Electronics, he [s]upervised and coordinated business with Chitron USA to import all its purchased goods into China (emphasis added); and -Wei acknowledged at trial that a document she last saved on her computer in October 2006 said that Chitron's customer base is 99 percent Mainland Chinese customers. A sufficiency-of-the-evidence challenge will fail even when the evidence does not exclude every reasonable hypothesis of innocence; if the evidence can support varying reasonable -42- interpretations, the jury is entitled to choose among them. United States v. Quejada-Zurique, 708 F.2d 857, 859 (1st Cir.), cert. denied, 464 U.S. 855 (1983). Here, there is scant support for Wu and Wei's hypothesis of innocence. It was certainly reasonable for the jury to conclude that the controlled converters reached China (and might well have been unreasonable for the jury to conclude otherwise). And the fact that the government's case relied largely on circumstantial evidence does not detract from its persuasive force. See United States v. Cortés-Cabán, 691 F.3d 1, 12 (1st Cir. 2012).