Chong Sik Yu, also known as “Chris Yu,” and Yunseo Lee have been arrested for conspiring to unlawfully export dual-use electronics components, in violation of the Export Control Reform Act, and to commit wire fraud, bank fraud, and money laundering.
According to the Department of Justice (DOJ), since at least 2019, a U.S. company named America Techma Inc. (ATI) has illegally exported electronic components from the United States to Hong Kong for apparent re-export to other countries, including China, in violation of the Export Control Reform Act of 2018 (ECRA). Pursuant to the ECRA controls, the Department of Commerce administers export-licensing and other requirements for the export of goods, software, and technologies from the United States to foreign countries. These requirements restrict the export of items that could make a significant contribution to the military potential of other nations or that could be detrimental to the foreign policy or national security of the United States. The Commerce Department identifies the most sensitive items subject to EAR controls on the Commerce Control List (CCL), which is categorized by Export Control Classification Number (ECCN).
The DOJ alleges that Yu as ATI’s President, and Lee as an ATI Sales Representative, worked together and with others to ship what they knew to be export-controlled items to Hong Kong and China. For instance, in June 2019, ATI obtained electronics components — which are export-controlled under the CCL for missile technology, nuclear nonproliferation, and anti-terrorism reasons —from a U.S. supplier (U.S. Supplier-1), and then sent those components to a trading company in Hong Kong (Hong Kong Trading Company-1). In January 2020, ATI attempted to send to Hong Kong Trading Company-1 several electronic components, which are export-controlled under the CCL for anti-terrorism, national security, regional stability, missile technology, nuclear nonproliferation, and anti-terrorism. After the January 2020 package was detained by law enforcement, Yu and Lee discussed methods for evading future law enforcement scrutiny by, for instance, transshipping packages through South Korea, and by using a separate company based in New Jersey (the “New Jersey Reshipper”) to send shipments to Hong Kong in an attempt to avoid customs scrutiny of ATI’s shipments.
For instance, on Feb. 12, 2020, Lee sent an email to another ATI customer located in Hong Kong (Hong Kong Company-2) stating that: “[W]e had delivery issue currently with customs, so we’ve decided to release all items to South Korea first and release to HK from Korea temporarily.” The next day, Lee received a response, which stated, in part, “Most of the items we buy from ATI are under ECCN restriction, so I guess ATI will stock in and release to [ATI’s branch in South Korea], and then ship to HK . . . am I correct?” Lee replied, “Yes you are right.”
On March 5, 2020, Lee responded to Hong Kong Company-2’s inquiry regarding whether ATI could sell certain components to China. Lee’s response, which copied Yu, stated: “We’ve sold” the requested parts “to China customer many times. . . But currently we have customs issue so we don’t know how to handle it. [W]e are thinking we release all controlled parts to South Korea first then release to HK from Korea[.]”
Hong Kong Trading Company-1 also advised ATI on steps to take in order to evade U.S. export controls. For instance, Hong Kong Trading Company-1 advised Yu and Lee to use a marker to cover ATI’s name on labels, to cover each component with an electro-static discharge (ESD) bag, to remove all original documentation from the package, and to use the New Jersey Reshipper to send the shipment. On March 14, 2020, Lee sent an email to Hong Kong Trading Company‑1, copying Yu, stating: “We will follow your direction like adjusting invoice or removed label. But we do not have responsible if it will have problem during the transit to you. But for sure, we will do everything what you want for preparing shipments. We just hope that there is no more detained package.”
In April 2020, ATI sent a package of components to Hong Kong Trading Company-1 using the New Jersey Reshipper. The package was inspected and detained by U.S. customs authorities. Consistent with Hong Kong Trading Company-1’s instructions, the components had been placed in ESD bags labelled with part numbers different from the actual part numbers. One of the components in the April 2020 shipment was export-controlled under the CCL for national security and anti-terrorism.
Financial and shipping records establish that ATI has had a long-standing relationship with Hong Kong Trading Company-1. Between August 2016 and July 2020, ATI shipped more than 200 packages to Hong Kong Trading Company-1. In the one-year period between May 2019 and June 2020, Hong Kong Trading Company-1 transferred over $800,000 into ATI’s bank account in the United States.
No one involved in any of these transactions obtained the licenses required under the ECRA to export these dual-use components.
Yu, 58, of Oradell, New Jersey, and Lee, 33, of Fort Lee, New Jersey, are charged with one count of conspiring to unlawfully export dual-use electronics components, which carries a maximum sentence of 20 years in prison, one count of conspiring to commit wire fraud and bank fraud, which carries a maximum sentence of 30 years in prison, and one count of conspiring to commit money laundering, which carries a maximum sentence of 20 years in prison. The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendants will be determined by a judge.