Information Source
ENFORCEMENT OF U.S. GOVERNMENT EXPORT, IMPORT AND DANGEROUS GOODS REGULATIONS

Persons involved in international trade and the transport of dangerous goods must be fully aware of the array of regulations which cover those activities. A working knowledge of these regulations is essential.  The alternative is to face the consequences of enforcement actions caused by non-compliance. International trade transactions and dangerous goods transport are both areas which are highly unforgiving of compliance-related mistakes resulting from internal process control breakdowns.  Even simple clerical errors can result in serious fines and penalties.  Constant attention to detail is absolutely required in all cases. The following will provide you with an overview of enforcement issues and the roles of the primary agencies involved in that process.

EXPORT ENFORCEMENT

Bureau of Industry and Security (BIS) Export Enforcement Process

Within the Bureau of Industry and Security (BIS), the Office of Export Enforcement is charged with protection of U.S. national security, homeland security, and advancement of economic and foreign policy interests through a law enforcement program focused on: sensitive exports to hostile entities, proliferation activities of concern, and prohibited foreign boycotts. Besides outreach activities to the export community, prevention also includes actions that directly stop violations before they occur, such as recommending denial of license applications, conducting pre-license checks and pre-shipment inspections, detaining shipments suspected of violations of the EAR, placing parties on the Unverified List, screening foreign nationals for appropriate access to controlled technology, and issuing warning letters to industry partners.

The Office of Export Enforcement (OEE), as the primary enforcement arm of BIS, works to keep the most sensitive goods out of the most dangerous hands.  OEE conducts its operations from Headquarters DC and nine field locations in Boston, Chicago, Dallas, Houston, Los Angeles, Miami, New York, San Jose and Washington, DC.  OEE works cooperatively with the exporting community to prevent violations.  When prevention is not achieved, OEE conducts investigations to gather evidence to support criminal and administrative sanctions.

OEE Special Agents are sworn Federal law enforcement officers with authority to make arrests, execute search and arrest warrants, serve subpoenas, and detain and seize goods about to be illegally exported. OEE investigations are initiated on information and intelligence obtained from a variety of sources, and are conducted to objectively and thoroughly gather testimony and evidence of alleged or suspected violations of dual-use export control laws.

OEE conducts on-going reviews of export records to uncover attempts to export items illegally and to detain illegal shipments.  OEE specifically targets items for export to destinations of concern and exports of proliferation concern.  Through the AES Review Program, OEE also identifies past shipments that may have violated the Export Administration Regulations and refers them for further investigation. Hundreds of investigations of suspected export control violations occur annually, based on the routine review of Automated Export System (AES) records.

Temporary Denial Orders are issued by the Assistant Secretary for Export Enforcement, denying any or (typically) all of the export privileges of a company or individual to prevent an imminent or on-going export control violation. These orders are issued ex parte for a renewable 180-day period and cut off not only the privilege to export from the United States, but also the privilege to receive or participate in exports from the United States. In some cases, a company's privileges may be taken away for many years.

Violations of the EAR may be subject to both criminal and administrative penalties.  Criminal penalties can reach up to 10 years imprisonment and $1 million per violation.  Administrative penalties can reach $11,000 per violation, and $120,000 per violation in certain administrative cases involving national security issues.
 
Violators may also be subject to denial of their export privileges.  A denial of export privileges prohibits a person from participating in any way in any transaction subject to the EAR.  Furthermore, it is unlawful for other businesses and individuals to participate in any way in an export transaction subject to the EAR with a denied person.

Many export enforcement actions may be the result of inadequate internal controls related to proper completion of export documentation and license applications, inadequate screening of foreign consignees and end users, and incorrect license determination. The latter requires a proper commodity jurisdiction determination, correct classification by Export Control Classification Number (ECCN) found on the Commerce Control List (CCL) of the EAR if applicable, and determination if the commodity is “dual use.”  Dual use items have both military and civilian end use application and are under the jurisdiction of BIS.

Below are some examples provided by BIS of recent enforcement actions by OEE. These examples are found in the BIS publications “Don’t Let This Happen to You” and the BIS updated “Major Cases List.”

Bureau of Industry and Security (BIS) Export Enforcement Examples

Export Documentation:

  • False Statements on Export Documents
    A California company was subjected to significant fines and denial of export privileges for twenty five years for filing false Shipper Export Declarations. BIS also charged that shipments of unlicensed items were made to China with the knowledge that the actions were contrary to the EAR.
  • False Statements on Export Documents
    A New York freight forwarding company agreed to pay $250,000 in administrative penalties for making false or misleading statements on export documents on 41 occasions for shipments to various destinations.  The company president was also required to serve two months of imprisonment and three years of supervised release.
  • Shipment of controlled items without required export licenses
    A California based company was fined $700,000 and subject to a three year denial of export privileges for export of items found on the Commerce Control List (CCL) without a license. The items were diaphragm pumps shipped to China, Syria, Israel, Iran, and the UAE.

Screening:

  • Controlled items to third parties
    Electronic components for missile guidance and launch firing systems were exported by a U.S. company to restricted parties on the U.S. Entity List.  Subsequently, the goods were forwarded to Indian agencies for missile launch development and design. The president of the company pled guilty to conspiracy to violate the EAR and the Arms Export Control Act (AECA).
  • Export of pulse generators to India
    A California company received a criminal fine of $300,000 and five years probation for export of pulse generators to parties in India on the BIS Entity List. The end users were placed on the Entity List for nuclear non-proliferation reasons.
  • Computers and related hardware to Sudan
    A petroleum corporation was ordered to pay an administrative fine of $49,000 for the unauthorized re-export of computers and related hardware to Sudan from Egypt and the United Kingdom. Shipment was contrary to EAR anti-terrorism restrictions and the Sudan trade embargo.

License Determinations:

  • Export of night vision devices
    A manufacturer of sporting goods was fined $650,000, required to pay $223,000 in administrative penalties, and placed on five years probation for exporting night vision devices designated as “dual use items” to fourteen countries including Japan without the required exported licenses. The violations occurred over a period of two years.
  • Export of gun sights
    A sporting goods retailer was assessed an administrative penalty of $510,000 for exporting gun sights originally designed and produced for civilian end use to a wide range of destinations without the required export licenses.
  • Shipment of electronic components with “dual use” end use applications
    Owners of a Wisconsin company were imprisoned and forced to surrender over $300,000 in profits from transactions involving unlicensed exports to China of electronic components with radar and satellite applications.

Defense Trade Controls: Export Enforcement Process of the
International Traffic in Arms Regulations

The International Traffic in Arms Regulations (ITAR) is found in 22 CFR 120-130. These regulations cover the permanent and temporary export and temporary import of defense articles including the permanent export of technical data and software related to defense articles, and the export of defense services.  All of these are defined in the ITAR.

The U.S. Department of State’s Directorate of Defense Trade Controls (DDTC) has the responsibility for control of the articles and services related to the defense trade as specified in the ITAR.  Within DDTC, the Office of Defense Trade Controls Licensing Division is charged with international trade approval authority via the issuance of permanent and temporary export and temporary import licenses and the approval of agreements such as Technical Assistance Agreements and Manufacturing License Agreements.  Licenses are processed by licensing officers assigned to specific areas of expertise in accordance with the ITAR’s U.S. Munitions List (USML) Categories. The Office of Defense Trade Controls Licensing’s Compliance and Enforcement Division has primary ITAR enforcement authority.

In practice, the ITAR is also enforced by several other federal agencies to include Customs and Border Protection (CBP), Immigration and Customs Enforcement (ICE), the Federal Bureau of Investigation (FBI), and the Department of Defense’s Defense Criminal Investigative Service (DCIS). All of these agencies actually have full enforcement authority to detect, investigate, and charge violators of the ITAR.  Violations of the ITAR are technically violations of the AECA.  Violations rising to the level of criminal violations are filed by all of these agencies in enforcement actions with the Department of Justice U.S. Attorney’s Office within their respective geographical regional areas of responsibility.  Civil infractions and civil violations may be directly charged to the violator by any of the respective agencies having enforcement authority. However, the primary agency in these types of cases and actions will usually be Customs and Border Protection. 

The ITAR contains the U.S. Munitions List (USML). This is a list of articles and services controlled by the ITAR.  Articles and technology not found on the USML are controlled via other sets of regulations including the Dept. of Commerce Export Administration Regulations (EAR). The Commerce Department’s Bureau of Industry Security has enforcement authority in this area to include items classed as “dual use” with both civilian and military end use.

Licensing Officers at DDTC are individually assigned the processing responsibility for applications by USML Category.  For example, licensing officers who work on USML Category VIII items have expertise in the field of aircraft and associated equipment to include technical data.

Information on AECA/ITAR enforcement actions may be found in various sources. The DDTC website www.pmddtc.state.gov lists current major enforcement actions to include violator consent agreements. The Department of Justice website www.usdoj.gov also lists major U.S. export enforcement actions. The Department of Commerce BIS has their own website www.bis.doc.gov which lists major export EAR violations to include a publication titled “Don’t Let This Happen to You”.  While the BIS information is related to EAR violations, it is still a good source of information concerning illegal activities and how they occur and how internal organizational compliance controls can break down. Internal compliance systems must include provisions for export documentation, screening of end users, and determination of license jurisdiction.

Below are examples of recent enforcement actions.  These actions are concerned with various USML Categories.

Export Documentation:

  • Attempted export of military equipment
    A Virginia company was fined for the unlicensed export of military ballistic helmets and for making false statement on an export declaration related to that transaction. The investigation was jointly conducted by ICE, BIS, and DCIS.
  • Attempted export of weapons and military items
    A California person pleaded guilty to attempting to export 10,000 Uzi machine guns and night vision devices to Iran. The shipping papers were to indicate that the items were to be shipped to Dubai. The investigation was conducted by the FBI.
  • Attempted export of military aircraft components
    Two persons were charged in California with attempting to illegally export components for the F-14 fighter jet to Canada. The items included military cable assemblies, wiring harnesses, and other restricted components. The transaction came under scrutiny because Iran is the only nation in the world that continues to fly the F-14 as a combat aircraft. The investigation was conducted by ICE and DCIS.

Screening:

  • Export of military aircraft parts
    A New York person was sentenced to imprisonment for the export of aircraft parts for the C-130 and P-3 end use platforms. The hardware was diverted to Malaysia for ultimate shipment to Iran. The investigation was conducted by ICE.
  • Export of missile components
    A Pennsylvania company was fined for an illegal export of ballistic missile component material to a company on the United Arab Emirates.  The material ultimately was diverted to Pakistan.  After the shipment was made the company attempted to mislead investigators according to the Dept. of Justice.
  • Export of military aircraft repair parts kits
    A California company was sentenced to imprisonment for exporting military aircraft kits of components and repair parts maintenance kits.  The parts were to be sent to Germany and the United Arab Emirates for ultimate destination to Iran. The investigation was conducted by ICE and DCIS.

License Determination:

  • Export of rifle scopes
    A Pennsylvania company pled guilty to exporting rifle scopes without the required Department of State export licenses. The items were considered to be USML classed defense articles.
  • Export of software
    A person in California person pled guilty to violating the AECA by illegally exporting software source code related to the training of military pilots to China. The investigation was conducted jointly by the FBI and ICE.
  • Export of militarized vehicles
    A person was sentenced in the District of Columbia for illegally selling militarized vehicles to various individuals in Middle East nations. Vehicles specially designed or modified for military end use are considered to be subject to the licensing requirement of the ITAR.  The case was investigated by ICE and DCIS.

These examples are just a few of the relatively lower profile cases which have occurred recently.  High profile cases involving the illegal export of night vision devices and related technology and the export of aircraft navigation systems designed for military end use with a stated end use for civilian aircraft are also well known examples. In all of the cases internal compliance controls were either non- existent, lacking, or simply not followed. The end results were severe penalties as a result of enforcement action by federal law enforcement agencies acting both individually and jointly.

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