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$400,000 Penalty, Audit Requirement to Settle Charges of Unauthorized Exports

Monday, March 04, 2019
Sandler, Travis & Rosenberg Trade Report

The State Department reports that a U.S. company will pay a $400,000 civil penalty to resolve allegations of unauthorized exports of defense articles, including technical data; the unauthorized furnishing of defense services; and failure to appoint a qualified empowered official. According to State, a compliance program review initiated by the company found “decades of systematic, reoccurring violations” involving the manufacture and sale of goods controlled on the U.S. Munitions List.

The department states that half of the penalty will be suspended on the condition that the funds are used for approved remedial compliance measures. These measures, which must remain in effect for 18 months, include the following.

- establish policies and procedures for all employees with responsibility for compliance with the International Traffic in Arms Regulations and the Arms Export Control Act to address lines of authority, staffing levels, performance evaluations, and career paths

- appoint a qualified individual to serve as an internal special compliance officer to implement the required compliance measures

- review and verify the export control jurisdiction of all items the company manufactures

- conduct an external audit to assess and improve the company’s compliance program

State notes that the company lacked qualified personnel, ITAR compliance training, a classification system, and a documented export compliance program. On the other hand, the company voluntarily disclosed the alleged violations (though not immediately after discovering them), acknowledged their seriousness, cooperated with the department’s review, and instituted a number of compliance program improvements. For these reasons, State has determined not to administratively debar the company at this time.

For more information on export compliance issues, please contact Kristine Pirnia at (202) 730-4964.

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