Export Violations Sanctions Continue at BIS

As readers of this blog undoubtedly know, the Bureau of Industry and Security (BIS) is the U.S. government agency responsible for regulating the export of sensitive technology. This is including items related to national security and nuclear proliferation. Companies violating U.S. export control regulations can face penalties and fines from the BIS.

In general, settlements between the BIS and companies often involve paying fines and implementing compliance measures to prevent future violations. These compliance measures may include enhanced training programs, improved recordkeeping systems, and the appointment of a compliance officer.

Settlements may also involve temporary suspensions or permanent revocations of export privileges. In some cases, the BIS may refer the matter to the Department of Justice for criminal prosecution. Such a U.S. Department of Justice criminal investigation resulted in an eventual $27 million fine, and an order to disgorge $5.14 million in gains tripped up SAP (2021).

Things are toughening up over at BIS as well. Its latest action is a $2.77 million penalty imposed on 3D Systems Corp. for illegal exports of Aerospace and Military Design Documents and technology. As well as the export of some materials to Germany and China and, somewhat unusually, the failure to keep adequate export records (“one count of failure to comply with recordkeeping requirements”).  Also imposed in the case were compliance sanctions. Which Included mandatory audits and retaining a third-party consultant.  See BIS Website Reference.

While the 3D Systems’ sanctions don’t rise to the level of the immediate six-month suspension of any exporting privileges, likely to be followed by an extension, which was imposed against three U.S. companies last year for sending satellite and rocket technical drawings and blueprints to China. In that case, the investigation began when an aerospace and global defense technology company alerted BIS to the possible export violations by its supplier.

Particularly significant was the violation cited by BIS when 3D systems used e-mail systems to convey export-controlled documents when “to Germany, where 3D Systems maintained a mirrored server to store employee e-mails containing controlled technology.”  This misuse of emails is one of the many violations the RegDOX system could have prevented.

Interestingly, and again reflecting the duty of primes to police their supply chain to avoid and reveals violations, the BIS’s Office of Export Enforcement (OEE) Director John Sonderman noted that “[t]he enforcement action would not have been possible without a defense contractor coming forward when they noticed that a price quotation indicated that the quoted parts were to be manufactured in Asia using controlled technology.”

The bottom line is this: EAR (and ITAR) violations, inadvertent or otherwise, will not be ignored by your contracting partners or federal agencies, and the curing sanctions will be much more painful than the avoidance remedies.

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