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California Company Fined $750,000 for Unlicensed Exports of Encryption Software

Friday, October 10, 2014
Sandler, Travis & Rosenberg Trade Report

The Bureau of Industry and Security has issued an order imposing a $750,000 civil penalty on a California company to settle charges that it committed 55 violations of the Export Administration Regulations. These include 51 unlicensed exports of operating software with encryption functionality, classified under Export Control Classification Number 5D002 and controlled for national security reasons, to end-users in China, Hong Kong, Russia, Israel, South Africa and South Korea, as well as four unlicensed exports of such items to entities in China identified on the BIS Entity List. If this penalty is not paid in a full and timely manner, the company’s export privileges may be suspended for one year.

Assistant Secretary of Commerce for Enforcement David Mills said the company received a “significant mitigation” of the penalty amount because the violations were voluntarily disclosed. At the same time, Mills added, the size of this penalty “should serve as a reminder to companies of their responsibility to know their customers and, when using license exceptions, to ensure their customers are eligible recipients.”

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