A U.S. company was denied export privileges in 1995 for illegally exporting zirconium and making false declarations on Department of Commerce (DoC) license applications and shipping documents, which involved the reexport of zirconium to third country destinations. Zirconium is used to make cluster bombs. The parent company paid $9.4 million in criminal fines and an additional $1.5 million in civil fines. Its subsidiary company, which made the exports, was fined $2 million and debarred for 3 months with probation for the balance of the 3 year denial period. This export violation adversely affected the ability of other U.S. and foreign companies to effectively conduct their international programs. Guilty criminal verdicts were issued against at least one U.S. person. In addition, a Chilean arms manufacturer paid $8.6 million in civil penalty fines before fleeing to avoid imprisonment.
A U.S. subcontractor component manufacturer exported without a license three (3) integrated circuits to an overseas buyer residing in a country in the middle east. The U.S. company is a single source supplier of the integrated circuits, which are specifically designed for delivery to a major U.S. defense contractor for end use in night vision equipment by U.S. armed forces. The U.S. subcontractor is not registered with the Department of State (DoS).
SCENARIO 1 RESULTS: The subcontractor should have registered with the DoS, DDTC, obtained export approvals, and complied with all other requirements of the International Traffic in Arms Regulations (ITAR). Because the subcontractor failed to implement an export compliance program and take appropriate compliance actions, it is confronted with the following difficulties:
- Time and energy expended to collect related export documents (if any)
- Expensive legal bills and a seemingly endless investigation
- Adverse publicity
- Possible shipment delays, possible seizures and forfeitures
- Possible fines levied against the company and individuals
- Possible imprisonment of company personnel (executives and others)
- Prohibition from accepting contracts from the U.S. Government
- Debarment of the company and individual(s) from exporting
- Debarment of the subcontractor could harm business arrangements (current and projected with major defense contractors)
- Additional administrative actions taken by the DoS or the DoC
- Possible loss of job(s)
A U.S. company has produced computer circuit boards for 30 years citing at times outdated DoC authority when exporting. The U.S. company also specifically designs, develops, configures, adapts, modifies, and manufactures circuit boards for use in defense articles but either has never heard of the International Traffic in Arms Regulations or has discounted its relevance to the company’s operations. The company has employed foreign persons from several countries without thought to their legal status or export licensing. There is little if any recordkeeping. This scenario is typical of that which non-compliant companies experience.
SCENARIO 2 RESULTS: At this point, the company needs both legal assistance and help from an export compliance consultant. The following ITAR compliance actions are important to take:
- Submit a voluntary disclosure,
- conduct an export compliance audit for multiple years,
- Register with DDTC as a manufacturer and exporter of defense articles, technical data, and defense services,
- Identify an Empowered Official and staff an Export Compliance office
- Subscribe to a debarred parties vendor program,
- Obtain digital signature access and apply to use DDTC’s on-line automated licensing program, DTrade;
- Submit to DDTC the completed audit with a corrective action plan to DDTC; an Export Compliance Manual, and Export Compliance Procedures (instructions);
- Be responsive to DDTC’s requests for information.
Your selected law firm will advise you regarding any additional actions that may be necessary with the Department of Commerce and Customs & Border Protection (CBP).