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$100,000 Penalty for Deemed Export of Technical Data

Monday, June 27, 2016
Sandler, Travis & Rosenberg Trade Report

The State Department announced June 22 that a registered manufacturer and exporter of defense articles will pay a $100,000 civil penalty as part of a settlement addressing the alleged unauthorized export of technical data to a citizen of China (which is subject to a U.S. arms embargo) employed by the company as a research scientist. However, State has decided against an administrative debarment of the company and additional remediation (and related oversight).

According to official documents, mitigating factors included that the company voluntarily disclosed the facts at issue, acknowledged the serious nature of the allegations, provided “exceptional” cooperation with the department’s review and implemented extensive remedial measures. Countervailing factors included deficiencies in the company’s export compliance program prior to the alleged violation, the involvement of a person from China, the amount of time (more than 18 months) between discovery of the issues and notification to State, and the potential harm to national security.

According to an agency press release, the settlement was reached following an extensive compliance review by State’s Office of Defense Trade Controls Compliance and “highlights the importance of ensuring effective oversight of intra-company transfers of controlled items (including technical data), and the need to obtain appropriate authorization from the Department for such transfers to foreign person employees.”

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