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California Company Fined $10 Million for AECA and ITAR Violations

Monday, June 23, 2014
Sandler, Travis & Rosenberg Trade Report

The State Department announced June 18 that it has concluded an administrative settlement with a California corporation to resolve alleged violations of the Arms Export Control Act and the International Traffic in Arms Regulations. The company agreed to enter into a consent agreement following an extensive compliance review by the Directorate of Defense Trade Controls that found that many of the 339 alleged past civil violations of the AECA and ITAR occurred because the company did not properly establish ITAR jurisdiction over its radiation hardened and tolerant integrated circuit commodities. These commodities are defense articles controlled on the U.S. Munitions List under Category XV(d) and (e). State notes in a press release that certain controlled commodities were exported, re-exported or retransferred to entities on DDTC’s Watch List, and some of these entities were known front companies for or diversion points to countries proscribed under Section 126.1 of the ITAR.  

Under the terms of the two-year consent agreement the California company will pay a civil penalty of $10 million, although State has agreed to suspend $4 million of the penalty amount on the condition that it approves expenditures for self-initiated, pre-consent agreement remedial compliance measures and consent agreement-authorized remedial compliance costs. In addition, the company has committed to establish an internal special compliance official position to oversee the consent agreement, conduct two audits of its compliance program, and implement additional compliance measures such as improved policies and procedures and additional training for employees and principals. 

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