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Defense Contractor to Pay $8 Million for Illegal Exports

Friday, May 03, 2013
Sandler, Travis & Rosenberg Trade Report

The State Department announced this week an administrative agreement under which a major defense contractor will pay $8 million in civil penalties and remedial expenditures for hundreds of civil violations of the Arms Export Control Act and the International Traffic in Arms Regulations committed over the course of many years. An agency press release states that these violations have largely consisted of failures to properly manage State Department-authorized agreements and temporary import and export authorizations, including inaccurate tracking, valuation and documentation of temporary exports and imports of controlled hardware, manufacture of such hardware by the company’s foreign partners in excess of approved amounts, and failures to timely obtain and submit required documents. State notes that the company repeatedly discovered and disclosed these violations, in some cases finding that previously reported remedial measures had failed to prevent or detect additional similar violations.

Under the terms of a four-year consent agreement, half of the $8 million penalty will be suspended on the condition that the company has used or will use the funds for approved remedial compliance measures. The consent agreement also requires the company to engage an external special compliance official, conduct two external audits of its compliance program and implement additional compliance measures. State has concluded that because the company voluntarily disclosed nearly all of the ITAR violations resolved in this settlement, acknowledged their serious nature, cooperated with department reviews, and implemented or has planned extensive remedial measures, an administrative debarment of the company is not appropriate at this time.

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