Published in the Daily Bugle, July 12, 2024
I don’t usually follow court cases when I’m not the one indicted. One exception is U.S. vs Quadrant Magnetics because the interpretation of Specially Designed has been a point of contention. Court cases have a way of impacting regulations[1] in unexpected ways; the Lachman follies from the turn of the century were a driving force for the modern definition of Specially Designed we know today, so I’m watching this one carefully.
Now, I won’t comment on the merits of the case, although I have my opinions[2]. Everyone is innocent until proven otherwise, and everyone can and should avail themselves of a vigorous and creative defense. But when that creativity would set Category V charges around the base of Specially Designed, I have thoughts.
The basics of the case concern the alleged export of allegedly ITAR technical data without a State authorization for the manufacture of allegedly ITAR-controlled defense articles abroad[3], specifically magnets[4]. The technical data was marked as ITAR, and the owner of the data (Quadrant was a sub-contractor to manufacture the magnets to the Prime’s specifications) even had a DDTC Commodity Jurisdiction (CJ) stating the items were in fact ITAR. The magnets in question were to be used in or with defense articles with an ITAR catch-all entry for items Specially Designed for the defense articles[5]. The J&C of the data seems pretty slam-dunk ITAR, but remember that vigorous and creative defense, so not so fast.
In a motion to dismiss, the defense claimed the Government hadn’t proven the magnets and data are in fact ITAR, because they could be released by (b)(3). Essentially, while it appears the defense hadn’t offered up an equivalent magnet used in or with an item (1) not subject to the ITAR and (2) was or in production, the defense asserts that (b)(3) is unconstitutionally vague because it requires concrete proof that no commercially equivalent magnets exist in order to prove the magnets in question ARE ITAR. They further assert that they never should have been indicted, and search warrants uncovering embarrassingly incriminating[6] data were invalid, because the Government didn’t conclusively prove that no such commercial equivalent magnets existed prior to issuing the indictment and asking a judge for warrants.
By extension, in addition to satisfying the “catch” in paragraph (a)(2) of Specially Designed, to adequately determine J&C, a classifier needs to conclusively rule out all paragraph (b) releases. Since it is impossible to check every neodymium or samarium-cobalt magnet used in or with a commercial product anywhere in the world, one can never conclusively rule out (b)(3), so the whole shebang should come crashing down.
Of course, there is a CJ stating ITAR jurisdiction, but the defense notes that the Government didn’t provide analysis showing that they exhaustively ruled out any commercial equivalents, as nothing to that effect was mentioned in the CJ response. I find this one interesting, because in my experience, CJ determinations never provide rational or analysis beyond “meets the threshold.” Godot will show up, pastries in hand, long before anyone gets a detailed explanation from DDTC.
Thankfully, the judge in this case seems to have carefully reviewed both the text and the history of Specially Designed, and denied the defense motion. Specifically, (b)(3) can be used to release an item from Specially Designed, if you can affirmatively uncover a commercial equivalent. The item in question, if “caught,” remains “caught” (i.e., ITAR in this case) until such item shows up.
Essentially, the judge threw out the argument that “I don’t have a shred of exculpatory evidence, but you can’t convict because you can’t prove the evidence doesn’t exist.”
Why bring this up, other than to revel in a Specially Designed discussion? Because it reinforces the conclusion of an October 20th column, the very first in the Not So Fast Bucko series[7]. While that column primarily focused on the fact that the key to (b)(3) is not finding a commercial equivalent of the item, but on a commercial item that uses the item in question[8], the key here is that an item is caught until it’s released. The extent of the search for a (b)(3) equivalent is a function of your perseverance and faith that it exists[9]. If you can’t find an equivalent, you can’t release it.
Got J&C questions? – please reach out to me at ArtOfJC@arinovis.com
[1] See RMS Titanic vs Iceberg, et al, 1912.
[2] I ALWAYS have opinions.
[3] Just assume the term alleged modifies any items or actions of the defendants described herein.
[4] That the magnets are actually magnetic does not seem to be in dispute.
[5] At least Category VIII(h)(1), a catch-all for items Specially Designed for Stealth Super Friends aircraft.
[6] Allegedly.
[7] https://arinovis.com/home/not-so-fast-bucko/
[8] It’s not clear from the judge’s analysis if they understood this distinction, but they get a pass.
[9] And realistically, schedule, budget, and resources.