FC: Feds nab two PC crypto-exporters allegedly shipping to China

R. A. Hettinga rah at shipwright.com
Thu Aug 30 23:28:22 EDT 2001

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Status:  U
Date: Thu, 30 Aug 2001 22:51:25 -0400
To: politech at politechbot.com
From: Declan McCullagh <declan at well.com>
Subject: FC: Feds nab two PC crypto-exporters allegedly shipping to China
Sender: owner-politech at politechbot.com
Reply-To: declan at well.com

Here's some background on the KIV-7HS crypto-hardware, which is what these
poor saps allegedly were trying to buy:

>Rainbow Mykotronx's KIV-7HS module is a compact, economical,
>high-performance, and user-friendly COMSEC device specifically designed to
>meet PC users' needs for secure data communication links. The KIV-7HS
>protects classified and sensitive digital Type 1 data transmissions at
>data rates up to 1.54 Mbps, and is ideal for compliance with Government
>directives NACSI 6002 and DoD Instruction 5210.74.



Date: Thu, 30 Aug 2001 22:06:58 -0400
Message-Id: <200108302206.AA89522232 at mail.cipherwar.com>
Mime-Version: 1.0
Content-Type: text/plain; charset=us-ascii
From: " Scully at cipherwar.com" <Scully at cipherwar.com>
To: <declan at well.com>
Subject: "Attempted" Illegal Export of Military Crypto to China

U.S. Customs Arrests Two for Attempting to Export Military Encryption
Technology to China
Thursday, August 30, 2001

Washington, D.C. -- The U.S. Customs Service today announced the arrest of
two individuals in Missouri and California for attempting to export
military encryption technology to China in violation of the Arms Export
Control Act.

The arrests followed a four-month investigation by the Customs Special
Agent-in-Charge Office in Baltimore. The Defense Department's Defense
Security Service assisted in the investigation.

"The technology that these individuals were attempting to export to China
is among the most sensitive items on the U.S. munitions list," said Allan
Doody, the Customs Special Agent-in-Charge in Baltimore. "The sale of these
units is so tightly controlled that the National Security Agency must
approve it."

According to an affidavit filed yesterday in federal court, Eugene You Tsai
Hsu, of Blue Springs, Missouri, and David Tzu Wvi Yang, of Temple City,
California, were attempting to export to China encryption devices used to
secure and safeguard classified communications. Hsu was arrested last night
at his home in Blue Springs, Mo. Yang was arrested yesterday at his place
of business in Compton, Calif.

The KIV-7HS encryption unit/technology is designed for government use only
and cannot be legally exported from the U.S. without first obtaining an
export license from the State Department. U.S. Customs received written
confirmation from the State Department that China is prohibited from
acquiring KIV-7HS unit/technology from the U.S.

In May 2001, Hsu contacted Mykotronx, Inc., a private company located in
Columbia, Maryland, to inquire about the cost of the KIV-7HS
unit/technology. A security officer at Mykotronx subsequently contacted
U.S. Customs agents in Baltimore to alert them to Hsu's interest in
obtaining the technology. U.S. Customs agents instructed Mykotronx to
inform Hsu that all future inquiries relative to the KIV-7HS units would be
handled through an intermediary import/export entity located in Maryland.

Between May 2, 2001, and August 18, 2001, an undercover Customs agent,
posing as the intermediary, engaged in a series of telephone conversations
and faxed correspondence with Hsu, Charlson Ho, and David Yang. The
telephone conversations and correspondence revealed that Ho, affiliated
with Wei Soon Loong Private, LTD, a Singapore-based company, was the buyer
of the KIV-7HS units.

Ho disclosed to the Customs undercover agent that his freight forwarder,
David Yang, would handle the export of the KIV-7HS units through his
business in Compton, California -- Dyna Freight. A check of Immigration and
Naturalization Service (INS) records indicated that Yang was born in Taiwan
and is a permanent resident alien of the United States.

The undercover U.S. Customs agent advised Hsu that the KIV-7HS units are
Munitions List items and would require a license for export. Hsu asked if
the undercover agent could obtain the license. After being told by the
undercover agent that no license would be approved for export to China and
that export to China would be a violation of the Arms Control Export Act,
Hsu continued to show interest. A check of INS records confirmed that Hsu
is a naturalized U.S. citizen.

On August 24, Yang confirmed to the U.S. Customs undercover agent that the
KIV-7HS units would be shipped from Los Angeles through Taipei to
Singapore, where Ho would then forward the units to China.

Persons or companies engaged in the export of items included on the U.S.
Munitions List to all foreign countries must be registered with the State
Department, Office of Defense Trade Controls. In addition to registration
with the State Department, persons or companies must apply for and obtain a
license from that agency for each item on the Munitions List exported to a
foreign country, which is the intended final destination of the goods.

Source: http://www.customs.ustreas.gov/hot-new/pressrel/2001/0830-00.htm

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R. A. Hettinga <mailto: rah at ibuc.com>
The Internet Bearer Underwriting Corporation <http://www.ibuc.com/>
44 Farquhar Street, Boston, MA 02131 USA
"... however it may deserve respect for its usefulness and antiquity,
[predicting the end of the world] has not been found agreeable to
experience." -- Edward Gibbon, 'Decline and Fall of the Roman Empire'

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