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Inadequate Oversight of Export Coordinator Cited in $500,000 Fine for Illegal Exports

Friday, January 03, 2014
Sandler, Travis & Rosenberg Trade Report

The Bureau of Industry and Security has entered into a settlement agreement with a Pennsylvania company that will pay a $500,000 civil penalty to settle charges that it committed 51 violations of the Export Administration Regulations by exporting U.S.-origin amplifiers controlled for national security reasons to end users in China, India, Russia, Hong Kong, Singapore, Malaysia, Taiwan, Korea and Thailand without the required export licenses. However, this fine is being suspended for two years and will be waived entirely if during that probationary period the company commits no further export violations. The company will also be required to complete an external audit of its export controls compliance program. If the company does not complete the audit and submit the results to BIS within 15 months its export privileges may be suspended for a year.

BIS states that the unlicensed exports at issue occurred at least in part as a result of the company’s failure to maintain adequate oversight of its export coordinator, who admitted that he had routinely approved items for export on the basis of license applications submitted to BIS (including those returned without action for failure to include necessary information) rather than waiting to receive any required export licenses. Until he was removed from his position this official was the sole company employee who had access to the electronic export license application systems for BIS and the State Department’s Directorate of Defense Trade Controls. BIS also notes that the company did not perform any internal or external audits of its export control compliance procedures during the time period the violative transactions occurred.

BIS charged that in light of its contemporaneous experience with applying for and receiving licenses and commodity classifications for items classified under ECCN 3A001, as well as its licensing history with BIS, the company knew or had reason to know that export licenses were required for the violative shipments. Moreover, in connection with certain charges, the company took actions to conceal or falsify the items’ classification and other licensing-related information, conduct that BIS states demonstrates the company knew or had reason to know of the applicable export licensing requirements.

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