- On May 5, 2005, the United States Attorney for the Eastern District of Wisconsin, announced that two Chinese citizens pled guilty to criminal charges in connection with a conspiracy to illegally export controlled semi-conductors and other electronic components from the United States to the People’s Republic of China ("PRC"). Jian Guo Qu, the owner of the Beijing Rich Linscience Electronic Company in the PRC, pled guilty in federal district court in Green Bay, Wisconsin, to one count of conspiring to illegally export dual-use semi-conductors and other electronic components from the United States to China without the proper export licenses from the Department of Commerce, Bureau of Industry and Security ("BIS"). Qu could face up to four years in prison. Ruo Ling Wang, the wife of Qu and an employee of the Beijing Rich Linscience Electronic Company, also pled guilty in federal district court in Green Bay to one count of falsifying and undervaluing a shipment of illegally exported electronics in an attempt to avoid scrutiny or inspection. Wang was sentenced to time served (six-and-a-half months) and ordered to pay a $1,500 fine.
- On May 11, 2005, BIS announced that EMD Biosciences, Inc. ("EMD") of San Diego, California, agreed to pay a civil penalty in the amount of $904,500 to settle charges that it committed 134 violations of the Department of Commerce’s Export Administration Regulations ("EAR") when it improperly exported biological toxins to Canada. In addition, EMD’s export privileges were denied for a period of two years, which BIS then suspended provided that EMD commits no further violations during the period of suspension.
- On May 19, 2005, the U.S. Justice Department announced that Office Max Inc., based in Itasca, Illinois, agreed to pay $9.8 million to end a False Claims Act ("FCA") suit accusing the company of violating federal law by supplying a government agency with products made in countries that do not have reciprocal trade agreements with the United States. In January 2003, Safina Office Products and two of its employees, Edward Wilder and Robert Hsi Chou Lee, sued Office Max in U.S. District Court for the District of Columbia, alleging that Office Max violated the FCA by failing to abide by the Trade Agreements Act ("TAA"). The plaintiffs alleged that when providing the General Services Administration ("GSA") with office supplies under a federal contract, Office Max provided products that were manufactured in countries such as China, which does not have a reciprocal trade agreement with the United States.
- On May 26, 2004, BIS announced that it had entered into a Settlement Agreement with Laurel Industrial, Inc. ("Laurel") of San Jose, California. As part of that settlement, Laurel agreed to pay a $44,000 civil fine and perform an audit of the company’s internal compliance program within one year. BIS alleged that in 1999–2000, Laurel exported certain underwater acoustic detection equipment to the PRC without the required licenses. BIS also alleged that Laurel made false/misleading statements on documents related to the exports.
- On June 1, 2005, BIS announced that it had entered into a settlement agreement dated May 25, 2005, with Mobil International Petroleum Corporation ("Mobil International") in the amount of $12,000 to settle charges related to the re-export of computer products to Sudan. The settlement agreement also stated that Mobil International’s failure to timely pay that civil penalty may result in the denial of Mobil International’s export privileges for one year. In a draft-charging letter that resulted from a voluntary disclosure submitted by Exxon Mobil Corporation on behalf of Mobil International, BIS alleged that as the former parent company to Mobil Oil Sudan, Ltd. ("Mobil Sudan"), Mobil International was liable for certain export violations committed by Mobil Sudan. The draft-charging letter further stated that from June 1999 through February 2000, Mobil Sudan ordered BIS-controlled computer products that were exported from England to Sudan through Egypt without first obtaining the required licenses for the reexports. BIS also entered into a settlement agreement with Mobil Services Company, Ltd. of London in the amount of $19,500, and Exxon Mobil Egypt (S.A.E), of Cairo in the amount of $18,000, for their roles in these transactions.
- On June 1, 2005, BIS entered into a settlement agreement with Bullard Gmbh of Bonn, Germany ("Bullard Germany"), in the amount of $36,000. Through a proposed charging letter, BIS alleged that Bullard Germany committed a number of violations of the EAR by reexporting thermal imaging cameras controlled under the Commerce Control List ("CCL") without the appropriate BIS authorizations. BIS maintained that Bullard Germany improperly reexported thermal imaging cameras to Austria and Switzerland in violation of conditions placed on an export license which only permitted the reexport of those cameras to NATO countries. Neither Austria nor Switzerland is a member of NATO. BIS also alleged that Bullard Germany reexported thermal imaging cameras to Austria, which were licensed for export to Switzerland, and exported thermal imaging cameras to France, which were licensed for export to Germany.
This case demonstrates the need for exporters to comply with all terms and conditions of their export licenses. Although Bullard Germany would have likely received an export license from BIS to reexport the cameras at issue, the company’s failure to follow the terms and conditions of its export licenses resulted in a civil penalty. An effective export compliance program is a must even for foreign companies that deal with controlled products and technology.
- On June 1, 2005, BIS entered into a settlement agreement with E.D. Bullard Co. of Cynthiana, Kentucky ("Bullard"), in the amount of $330,000. The settlement agreement also required Bullard to perform an audit of the company’s internal compliance program between 18–24 months following the date of the entry of the order approving the terms of the settlement agreement. Through a proposed charging letter, BIS alleged that Bullard committed a number of violations of the EAR including: exporting a thermal imaging camera to Israel in violation of the terms and conditions of an export license that only permitted reexports of that product, not direct export from the United States; exporting thermal imaging cameras to Germany, the Czech Republic, the Netherlands, and Spain in quantities that exceeded the amounts authorized by BIS export licenses; exporting, reselling or reexporting thermal imaging cameras from Germany to Austria and Switzerland in violation of a BIS export license that only authorized export to Germany for reexport to other NATO countries; exporting thermal imaging cameras to end users through intermediate consignees without authorization from BIS; exporting and reexporting thermal imaging cameras to destinations not approved under valid BIS export licenses; exporting thermal imaging cameras after the expiration of a valid export license; transferring a thermal imaging camera to a party not authorized under the export license; and submitting Shipper’s Export Declarations that contained false statements.
- On June 3, 2005, BIS announced that Wilden Pump and Engineering Co., LLC ("Wilden"), of Grand Terrace, California, agreed to pay a $700,000 civil penalty to settle charges that it violated the EAR in connection with the export of diaphragm pumps from the United States to Iran, Israel, the PRC, Syria, and the United Arab Emirates without the required export licenses. BIS also imposed a three-year denial of export privileges against Wilden for items on the EAR’s CCL. According to BIS, the denial will be suspended for two years as long as Wilden does not commit any violations of the EAR during that two-year period. BIS specifically alleged that between 2000–2003, Wilden committed 71 violations of the EAR by exporting diaphragm pumps without the required licenses, transferring diaphragm pumps knowing that violations of the EAR would occur, and by making false statements on export control documents.
- On June 3, 2005, the Department of Treasury’s Office of Foreign Assets Control ("OFAC") announced a number of civil penalties it had recently assessed.
- OFAC reached a $63,853 settlement with Fidelity Brokerage Services, Inc. d/b/a Fidelity Investments of Boston, Massachusetts, for allegedly operating an Iranian account in 1999–2000.
- OFAC reached a $750 settlement with Pioneer Valley Travel of Northhampton, Massachusetts, for providing unlicensed travel-related services to Cuba in 2001.
- OFAC reached a $2,500 settlement with Zooma Enterprises, Inc. of San Diego, California, for allegedly attempting to export goods to Iraq in 1998.
- OFAC assessed a $3,000 penalty against WTS Agencies, Inc. (formerly Inchcape Shipping Services) of Mobile, Alabama, for facilitating trade with Sudan in 1997.
- On June 8, 2005, BIS entered into a settlement agreement with Lufthansa German Airlines, owner of Lufthansa Cargo AG of Boston, Massachusetts ("Lufthansa Cargo"), in the amount of $18,000. Through a proposed charging letter, BIS alleged that Lufthansa Cargo violated the EAR by forwarding a shipment of Cobalt-57 to the Department of Atomic Energy, Directorate of Purchase and Stores ("DAE") in India without the required export license. DAE is an organization listed on the Department of Commerce’s Entity List. BIS also alleged that Lufthansa Cargo attempted to forward a shipment of Cobalt-57, iron foil and potassium ferrocyanide to DAE without the required authorization. Under the terms and conditions of the settlement agreement, failure of Lufthansa Cargo to pay the civil penalty within 30 days from the date of entry of the order will result in the denial of the company’s export privileges for a year.
- On June 17, 2005 the Department of State announced that it had imposed an administrative debarment on Hughes Network Systems (Beijing) Co. Ltd. ("Hughes"), pursuant to a January 26, 2005 consent agreement with the company. Under the terms of the debarment, Hughes is ineligible to participate in any activities regulated under the ITAR, including license applications, agreements, or other requests for approvals. According to the Federal Register notice, Hughes failed to comply with terms of a March 2003 consent agreement related to its involvement with failed satellite launches in the People’s Republic of China ("PRC"). The internal investigation revealed that many of the practices which led to violations of the ITAR and the March 2003 consent agreement had not been rectified within the company. Although notice of the debarment was not published until June 17, 2005, the debarment appears to have been effective as of the January 2005 consent agreement, and appears to have expired on May 14, 2005.
This article is presented for informational purposes only and is not intended to constitute legal advice.
