International Trade Law News

Various Japanese newspapers have reports that four employees of Japanese machine tools producer Horkos Corp were arrested this week for allegedly violating Japan's export control laws by exporting more than 1,000 sophisticated five-axis machining centers to 16 countries without the required export licenses and falsifying export documents.

The arrests follow a raid conducted by Japanese police on Horkos' headquarters and factory in July 2008 on suspicion that the company had illegally exported dual-use machine tools.

Although Horkos' machining centers exported machines can be used to manufacture automotive components and other commercial items, they can also be used to produce components for centrifuge separation devices for uranium enrichment and are controlled for nonproliferation reasons. As a result, Japan's Foreign Exchange and Foreign Trade Law requires Horkos and other exporters of five-axis grinding machines to obtain an export license from the Ministry of Economy, Trade and Industry (METI). (Similar products are classified on the U.S. Commerce Control List under ECCNs 2B001 and 2B201).

The Horkos employees that were arrested were allegedly involved in an effort to evade METI's licensing requirements by declaring on export declarations that Horkos machines did not require export licenses.

Labels: Export Controls, Japan

Labels: Export Controls, Japan

Allied Telesis Labs, Inc., the Raleigh, North Carolina based U.S. subsidiary of Japan's Allied Telesis K.K., was recently sentenced by a judge in the U.S. District Court in the Eastern District of North Carolina to pay a $500,000 criminal fine and placed on probation for two years after pleading guilty in March to one count of conspiracy to export advanced telecommunication products produced from U.S.-origin technology from Singapore, through the United Arab Emirates, to Iran.

According to press reports, "Allied Telesis Labs is a research facility of Allied Telesis, which was founded in 1987 and based in Bothell, Washington." Allied Telesis ATL designs and develops various high-speed fiber-optic telecommunications devices and multi-service access platforms, known as iMAPs.

Employees at Allied Telesis were accused of conspiring to obtain and execute a $95 million contract with the Iranian Information Technology Company to rebuild and upgrade the telecommunications systems of approximately 20 Iranian cities, including Tehran. Preparation for the execution of the contract went as far as the manufacture of approximately $2 million worth of iMAPs at ATKK facilities in Singapore developed from U.S. origin technology. The high-speed telecommunication equipment was to be shipped from Singapore to Iran via the United Arab Emirates.

The contract negotiations apparently collapsed and the telecommunications system was never shipped to or installed in Iran.

A confidential informant helped break the case and that the employees involved in the conspiracy were fired.

Labels: Export Controls, Japan, Sanctions; Iran

The BBC reports that police in Fukuyama, Japan have conducted a raid on the facilities of Horkos Corporation, manufacturer of machine tools, machining units and related peripheral equipment.

According to the report, Horkos is suspected of allegedly exporting machine tools to South Korea that could be used in the uranium enrichment process without the required export licenses. The report states that the machine tools may have been reexported to North Korea or the Middle East.

Click here for other recent stories involving enforcement of Japanese export control laws.

Labels: Export Controls, Japan

Japan's Daily Yomiuri reports that the Japan-made vacuum pumps found at a North Korean nuclear facility by the International Atomic Energy Agency (IAEA) were exported from Japan to Taiwan and then reexported to a North Korean trading company. The article states that the North Korean trading company, known as Namchongang, is "headed" by a former North Korean diplomat who served as North Korea's representative for purposes of the IAEA inspection of the nuclear complex at Yongbyon, North Korea.

The article also notes that a separate investigation conducted in Germany that found that Namchongang also purchased products from Germany for use in nuclear facilities and exported them to North Korea via Syria.

Japanese police have apparently charged the president of the Japanese trading company with violating Japan's Foreign Exchange and Foreign Trade Law by exporting eight items, including the pumps, without obtaining permission from the Ministry of Economy, Trade and Industry (METI).

Labels: Germany, Japan, North Korea

In what could be the wave of the future in export compliance by producers of export controlled products, Mazak Corporation, the North American manufacturing, sales and support arm of Japan-based Yamazaki Mazak Corporation recently announced that it has begun installing relocation detectors on all of its products to prevent the unauthorized export of the products to unauthorized destinations and to comply with U.S. and Japanese export control laws.

According to the company, the relocation detector is a permanent device that resides in the electrical cabinet of the machine. The device will signal an alarm and completely shut down the machine upon any repositioning and/or relocation of the machine. A new password is required each time a machine is relocated to verify the location. While the technology to do this has been available for some time, this is the first implementation designed to prevent violation of U.S. and Japanese export laws.

The initiative to include relocation detectors on its products was launched by Mr. Tomohisa Yamazaki, president of Yamazaki Mazak Corporation, and will apply to every machine shipped by any Mazak plant to any location throughout the world.

During the past few years, a number of Japanese companies have been involved in export control violations. For example, in 2006 Japanese precision measurement instrument maker Mitutoyo Corporation admitted that it violated Japan's Foreign Exchange and Foreign Trade Acts in exporting sophisticated measuring devices that can be used to produce nuclear weapons.

In mid-2007, a Japanese court sentenced four former Mitutoyo executives to multi-year jail sentences and fined the company ¥45 million (approximately US$350,000). Japan's Ministry of Economy, Trade and Industry (METI) subsequently imposed a two-phased, three-year export penalty on Mitutoyo. The first phase of the penalty prohibited Mitutoyo from exporting any products for six months (until January 3, 2008). In addition to the six-month ban on all exports, Mitutoyo remains prohibited from exporting Computer Numerical Control (CNC) coordinate measuring machines and their components for a further period of two years and six months (except for direct exports to specified end users).

Labels: Export Controls, Japan

The Japan Times reports that four former executives of Mitutoyo Corporation, a Japanese producer of sophisticated measuring devices, were sentenced on Monday to suspended prison for their role in exporting measuring devices to Malaysia and Singapore without obtaining export licenses from Japan's Ministry of Economy, Trade and Industry. Mitutoyo Corporation was fined 45 million Yen (approximately US$363,000). The article states that:

The presiding judge, Masahiro Hiraki, said in the ruling that the executives made profit their top priority at the Kanagawa Prefecture-based company, even though they were aware its products might be used by foreign governments to develop weapons of mass destruction.

According to prosecutors, an inspection team from the International Atomic Energy Agency came across a Mitutoyo device at a nuclear-related facility in Libya in 2003. Japanese investigators earlier said this was proof that some of the firm's exported devices were sold on the black market, adding that there was a possibility the devices may have been obtained by countries like Iran and North Korea for their nuclear programs.

Labels: Export Controls, Japan

The United States is not the only country considering raising the penalties for export control violations. Japan's Asahi Shimbun newspaper reported today that the Industrial Structure Council of the Ministry of Economy, Trade and Industry (METI) has proposed revising Japan's Foreign Exchange and Foreign Trade Control Law to increase penalties for export control violations by "at least 10-fold".

The article notes that "Under the current law, a company which exports such products or technology without permission faces a maximum fine of 2 million yen [approximately US$16,000]." The article also cites a source that indicates that "new penalties against falsified export applications will also be established". If the new penalties are implemented, it will be the "first time in 20 years for penalties on such illegal exports to be toughened."

Labels: Export Controls, Japan