Background

A U.S. company will pay a $6.6 million civil penalty in a case the State Department says highlights the importance of obtaining appropriate authorization to export software and determining proper export jurisdiction.

In November 2017 State raised concerns about the company’s potential misclassification of software used for testing radar equipment on fixed or mobile platforms and recommended that the company submit a commodity jurisdiction request. The company did so and it was determined that the software was controlled under the U.S. Munitions List. While it was waiting for that determination the company exported the software to several countries without authorization. After receiving the determination the company disclosed that it had exported its software to multiple countries under the Export Administration Regulations.

State notes that aggravating factors in this case included that the company continued to export the software under the EAR after being notified of State’s misclassification concerns and while the CJ request was pending. Mitigating factors included the company’s implementation of remedial compliance measures intended to detect, deter, and prevent future similar violations.

State will suspend $2.5 million of the penalty provided that the company uses this money for department-approved remedial compliance measures. The company will also be required to hire an outside special compliance officer for two years and conduct an external audit to assess and improve its compliance program.

For more information on avoiding or mitigating export compliance violations, please contact attorney Kristine Pirnia via email.

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