Tag Archives: Export Control

A Terrorist’s Stockroom?: The Effectiveness of e-Marketplace Prohibited Item Policies

Christina Krawec, Research Associate (christina.1.krawec@kcl.ac.uk)

Introduction

In attempts to regulate the trade of hazardous materials used in explosives or weaponry, internet marketplaces such as eBay, Amazon, and Alibaba have all implemented seller policies on their sites. Alibaba, for example, has a list of 410 radioactive, poisonous, toxic, flammable, explosive, and ozone-depleting substances that are prohibited from being listed.[1] Some work has been done to illustrate that, despite these regulations, sellers are able to sell hazardous materials. For example, Raymond A. Zilinskas and Philippe Mauger established in a 2015 study that biotechnology of concern could be acquired by non-state individuals via Alibaba.[2] Similarly, eBay has a list of 16 “explosives precursors” that are also restricted.[3] Despite eBay’s efforts to prohibit these substances, listings for some can still be found. This study shows that eBay’s listing policies are not effective in deterring users from selling what the site considers to be hazardous material.

Methodology

Table 1 shows the availability of eBay’s restricted explosives materials across eBay, Amazon, and Alibaba. A listing was included in this table if the advertised substance was over 95% pure (if the purity was listed and with the exception of hydrogen peroxide), and was included regardless of quantity, physical state (e.g. liquid or solid), or marketed use. Therefore, laboratory-grade and food-grade substances in small quantities were included. This was done because eBay’s policy does not provide detail regarding the nature of the prohibited substances; it simply lists the names of the restricted compounds. Furthermore, this study assumed that the listings were truthful about the product being sold, which may not have been the case. Listings were also only included in this table if their advertised material was in stock and available for any user to purchase.

Table 1: Listings of restricted explosives precursor materials as of 4 January 2017

Explosives precursor restricted by eBay Listings on eBay Listings on Amazon Listings on Alibaba
Aluminium/aluminum powder 4 10+ 1000+
Ammonium nitrate* 0 10+ 5+
Calcium ammonium nitrate 0 0 100+
Calcium nitrate 0 10+ 100+
Hydrogen peroxide above 12% weight by weight 0 10+ 100+
Magnesium nitrate hexahydrate 3 2 100+
Magnesium powder 0 0 100+
Nitric acid** 0 0 100+
Nitromethane 0 0 50+
Potassium chlorate 10+ 0 2000+
Potassium nitrate (saltpetre) 10+ 10+ 1500+
Potassium perchlorate 0 0 500+
Sodium chlorate 3 0 1000+
Sodium nitrate 4 8 2000+
Sodium perchlorate 0 0 300+
Sulphuric/sulfuric acid 6 10+ 700+

*Material also prohibited by Alibaba                                                        **Material also prohibited by Amazon                                                                 Note that there were hundreds, if not thousands, of results for some of these chemicals. The + indicates that at least that number of listings was found, but there were so many results that there may have been more.

Findings

For the purposes of this study, searching for the prohibited materials on Amazon and Alibaba serves as a comparison of availability. Amazon, in its listing policies, has a section on explosives, but does not discuss precursors. The page does, interestingly, list nitric acid as a prohibited hazardous material, but this is the only substance that has crossover with eBay’s list.[4] In addition, the only chemical in both Alibaba’s and eBay’s lists is ammonium nitrate. Otherwise, Alibaba has thousands of legitimate listings for explosives precursors. It is notable that these lists do not correspond with internationally-recognised control lists, including those published by the export control regimes.

For Amazon, there were more listings than were included in the table. These listings either had items that were “currently unavailable” in which there was no timeline for restocking, were temporarily sold out, or they were only available for purchase by Amazon Business accounts. For example, there were over ten listings for calcium nitrate available for any user to buy on Amazon. However, with an Amazon Business account, at least five more listings became available. If a non-state actor is able to fabricate a front company and successfully create an Amazon Business account, then this could be an effective means of opening more pathways for hazardous material acquisition.

The availability of these substances despite their restricted nature illustrates eBay’s need for further oversight and more detailed policies. While monitoring e-marketplace activity is difficult due to the size of the user base and speed of transactions, the current policy does not deter users from listing certain substances. One difficulty arises from the dual-use nature of these goods. For example, potassium nitrate (saltpetre) is used in the process of curing meat, but can also be used to make gunpowder. The question of controlling the sale of dual-use items has long been a challenge for the international export control regime. How can e-marketplaces prove that buyers are obtaining saltpetre for their cured pork and not for the development of explosives?

Recommendations

These observations lead to possible recommendations for the improvement of e-marketplace prohibition policies.

  1. At present, listed chemicals can be bought by anyone on eBay. If the site were to restrict certain substances from being bought by anyone without a registered business (as is the policy on Amazon), this might lower the possibility of an individual with ill intent to obtain an explosives precursor. However, implementation of this policy would require careful oversight: it could also restrict innocent users from acquiring these materials for legitimate purposes.
  2. eBay could consider adding more detail to its restricted product policy. Determining an allowed quantity and purity would make the policy clearer; adding a section describing the dual-use nature of the goods would also be informative to eBay users. Having clearer policies does not solve the issue, but more detail would at least provide education for the eBay community.
  3. Standardising naming conventions would allow e-marketplaces to more easily track prohibited chemicals being posted on the site. On Amazon, eBay, and Alibaba, chemicals can be found by their written name, their formula, or their Chemical Abstracts Service (CAS) identification number. In many cases, chemicals are only listed by their written name. There are so many variations to names that it would be easier to identify listings for specific substances if they were required to include a searchable CAS number as well. The e-marketplaces could also screen postings against lists of keyword terms. In addition to preventing listings where the item might be prohibited, such an approach could be used to identify account holders who are intent on engaging in prohibited activity. In this context, retailers could be encouraged to submit some form of “suspicious activity report” similar to those used in the financial sector.

The issue of selling weapons precursor materials online has no easy answers. However, increasing awareness of these issues and the imperfections in current policies allows further discussions to be made. The international export control regime will continue to struggle with the case of dual-use goods, and e-marketplaces should be aware of the difficulties they face as part of the ongoing challenge.

[1] “Prohibited Chemicals Reference,” Alibaba.com Rules Center, 2016.

[2] Raymond A. Zilinskas and Philippe Mauger, “E‐commerce and biological weapons nonproliferation,” EMBO, 2015.

[3] “Hazardous, restricted, or regulated materials,” eBay Rules & Policies, 2017.

[4] “Hazardous & Dangerous Items,” Amazon Seller Central, 2017.

Sources:

“Hazardous & Dangerous Items.” Amazon Seller Central. 2017. Accessed January 4, 2018. https://sellercentral.amazon.com/gp/help/external/200164570.

“Hazardous, restricted, or regulated materials.” eBay Rules & Policies. 2017. Accessed January 4, 2018. http://pages.ebay.com/help/policies/hazardous-materials.html.

“Prohibited Chemicals Reference.” Alibaba.com Rules Center. 2016. Accessed January 3, 2018. http://rule.alibaba.com/rule/detail/2069.htm?spm=a271m.8038972.0.0.cobpgz.

Zilinskas, Raymond A., and Philippe Mauger. “E‐commerce and biological weapons nonproliferation.” EMBO reports 16, no. 11 (2015): 1415-1420.

eBay, Alibaba, and Amazon search engines and results.

US Engineer Sentenced in Nuclear Espionage Case for Supporting China’s Nuclear Energy Program

Overview

On 30 August, a US nuclear engineer, Szuhsiung Ho, was sentenced to serve 24 months in prison and one year of supervised release for his part in illegally exporting US nuclear technology to China. The complex case highlights the need for an integrated and comprehensive approach to nuclear trade compliance.

Background

The case involved the illegal sharing of sensitive U.S nuclear technology and trade secrets with China. Szuhsieng Ho, a Taiwan-born naturalized US citizen and nuclear engineer working as an operative for the Chinese government was sentenced today to a two year prison term by a U.S District Court. He will also face a supervised one year probation period and a fine of $20,000. Ho had previously pleaded guilty under an agreement reached in January to engaging or participating in the unauthorized development or production of special nuclear material outside of the United States and originally faced a prison term of up to ten years and a fine of $250,000. Under the agreement, the US agreed to dismiss remaining counts against Ho from his original indictment in April 2016.

Ho operated a nuclear energy consulting business that engaged in the provision of technical consultancy to China General Nuclear Power Company (CGNPC), one of China’s nationalized nuclear entities. Ho assembled a network of experts from a number of different companies in order to help CGNPC indigenize knowledge related to the operation of nuclear reactors.

Ho’s illegal activity began as owner and president of Energy Technology International (ETI), a nuclear consulting firm. He acted, through ETI, as a senior advisor to the China General Nuclear Power Company (CGNPC), which is the largest Chinese state-owned enterprise specialized in the development and manufacture of nuclear reactors. CGNPC’s Board of Directors is comprised on Chinese Communist Party members and is controlled by the State-Owned Assets Supervision and Administration Commission of the State Council (SASAC), a special Chinese government agency.

Under the direction of CGNPC, Ho recruited and sent US-based experts to Chinese nuclear facilities where they shared technical information and assistance related to the production of special nuclear material for CGNPC, including for CGNPC’s small modular reactor, advanced fuel assembly, and fixed in-core detector systems, as well as the verification and validation of nuclear reactor-related computer codes.

Under the US Atomic Energy Act (AEA) 42 U.S.C § 2011, the technology Ho arranged to export to China is controlled as sensitive and therefore requires special authorization from the US Secretary of Energy. The National Nuclear Security Administration of the US Department of Energy implements the AEA under 10 C.F.R Part 810, “Assistance to Foreign Atomic Energy Activities.” The US regulates civil nuclear cooperation and circumventing the authorization process can result in damage to US national security by compromising US nuclear technology and expertise. According to the plea agreement, Ho was aware that his activities required such authorization after meeting with US Department of Energy officials to discuss the work to be undertaken and received confirmation that the export was not covered by 10 C.F.R. § 810.3. This was not the only relevant statue, however, and Ho ultimately plead guilty to violations of 10 C.F.R. § 810.8.

The individuals involved in the Ho case provided numerous reports containing sensitive information and trade secrets to CGNPC. From the period of 1997 to 2016, Ho, CGNPC and ETI engaged in this activity with the alleged intent of securing China with a technological advantage for the production of nuclear material. However, according to the terms of the plea deal, Ho’s defense team negotiated for a guilty plea discounting Ho’s motivation to injure the US or secure an advantage to China, arguing that Ho became involved in the plot only to make money and cheapen the cost of Chinese nuclear energy by speeding up the production process.

One of the individuals Ho engaged was Ching Ning Guey, a nuclear engineer with the Tennessee Valley Authority (TVA). Guey provided CGNPC with reports and technical assistance related to the operation of nuclear reactors. The Tennessee Valley appear to have informed Ho’s associate, Guey, about the authorization requirements associated with the information that he would later transfer. Guey later admitted to the TVA Office of the Inspector General, to supplying sensitive information regarding the production of special nuclear material. TVA contacted the FBI and Ching cooperated in the investigation under a plea deal in 2015 where he pleaded guilty to participating in the development of special nuclear material outside of the United States in violation of 42 U.S.C. Guey is set to be sentenced September, 2017.

Lessons and Preventing a Recurrence

The case highlights a number of important points.

First, the US government is intent on enforcing controls on nuclear transfer including with countries like China that has a relatively mature nuclear sector. In this case, the US government relied upon a previously unused part of the Atomic Energy Act (10 C.F.R. § 810.8) as opposed to the more usual 10 C.F.R. § 810.3.

Second, there is a need for firms of all sizes to take a systematic and holistic approach to trade controls. Just because the transfer was not covered by 810.3 does not mean the transfer is not subject to controls. The parts could equally be covered under the EAR.

Third, intellectual property from the Tennessee Valley Authority and others was transferred to China without authorisation. It is possible that better training could have protected TVAs intellectual property and its staff.

Fourth, in this case, employees of TVA and other companies appear to have exploited their positions and ignored warnings, highlighting the need for checks and balances in addition to training.