Export enforcement activities were alive and well over the summer. Multiple enforcement actions by the Bureau of Industry and Security (BIS) imposed civil penalties, denial orders, and mandatory remedial measures against a number of persons and entities in connection with unauthorized export activities. The unauthorized activities ranged from the knowing and willful export of military aircraft parts, to the export of scrap steel to restricted entities in Pakistan, and the release of technology controlled under the Export Administration Regulations (EAR) to Chinese nationals in Singapore. As the U.S. continues its efforts to protect national security by regulating sensitive exports, these cases serve as a reminder of the civil and criminal consequences for violations of U.S. export regulations.
On January 28, 2011, Chitron Electronics, Inc. (Chitron) was convicted of violating the International Emergency Economic Powers Act (IEEPA) for illegally exporting electronic components, subject to the EAR, to end users in China, including end users on the BIS Entity List. Chitron was also convicted of violating the Arms Export Control Act (AECA) for the export of electronic components controlled under the United States Munitions List (USML) to Hong Kong. In connection with those transactions, Chitron was also convicted of conspiring to violate the IEEPA and the AECA over a 10-year period. Chitron was required to pay a $10,400 special assessment, a fine of $15 million, and the Department of State placed it on the Debarred Parties List. Yuewei Wang, and Zhen Zhou Wu, employees of Chitron, were also individually convicted in connection with these transactions. Wang was sentenced to 36 months in prison and placed on the Debarred Parties List. Wu was sentenced to 97 months in prison and fined $15,000. Based on these convictions, on June 4, BIS imposed a 10-year denial order on Chitron, Wang and Wu.
On June 6, BIS published a settlement agreement with Akrion Systems, LLC (Akrion) for 144 violations of the EAR. Between 2004 and 2007, Akrion exported valves, pumps and related components, controlled under Export Classification Number (ECCN) 2B350 of the Commerce Control List (CCL), to Taiwan, Singapore, Malaysia and the People’s Republic of China without the required licenses. Akrion filed a Voluntary Self-Disclosure (VSD) in connection with the exports. Akrion received a $900,000 civil penalty.
Also on June 6, BIS issued an order denying the export privileges of Mohammad Reza Vaghari. Days earlier, Vaghari was convicted of participating in illegal business transactions with Iran between 2005 and 2008. Vaghari was convicted of two counts of violating the IEEPA for knowingly, and willfully, aiding and abetting the illegal export of ultrasonic liquid processors, stimulus isolators, and laboratory equipment to Iran via the United Arab Emirates (UAE), without the required approval from the Office of Foreign Assets Control (OFAC). Vaghari was also convicted of one count of conspiracy to violate the IEEPA in connection with the illegal exports, and one count of naturalization fraud for his attempt to obtain U.S. citizenship. Vaghari was sentenced to 33 months in prison.
On June 12, BIS published a settlement order with General Technology Systems Integration Corporation (GTSI) for one violation of the EAR. According to the settlement order, GTSI acted with knowledge of a violation when it ordered, bought and sold design and testing technology to be exported to China knowing that the transaction would violate the EAR. GTSI contracted with China Electronics Technology Corporation’s 24th Research Institute in China to design and test technologies for an 8-bit, 1.5-giga -samples-per-second analog to digital converter, and a quad-channel 14-bit mega-samples-per-second analog to digital converter. GTSI contracted to export technology for the development, production and use of those items, and to provide training on how to manufacture those items. BIS levied a $300,000 civil penalty against GTSI. In addition, GTSI was ordered to have three external audits conducted by a third party, to cover the time period from April 1, 2012 to April 1, 2018.
On July 9, BIS published a settlement agreement with Humane Restraints, Inc. The company was charged with 32 violations of the EAR. On 27 occasions, the company exported restraint devices to Germany, Greece, Hungary, Ireland, New Zealand, South Korea, Taiwan and the United Kingdom without the required licenses. On one occasion, the company attempted to export a restraint system to the U.K. without the required license; the shipment was seized at the border. The company was also charged with four violations for acting with knowledge of a violation for the attempted exports of restraint systems to Australia, Germany and Taiwan. The company received a $400,000 civil penalty, and is subject to a denial order for a period of two years.
Two different companies were charged with violations of the EAR for exports of scrap steel to an Entity List party in Pakistan. In July, Kesco Shipping Corporation received a $28,000 civil penalty for the export of scrap steel, classified as EAR99 under the CCL, to the People’s Steel Mill in Pakistan. In August, Global Metcorp LLC received a $50,000 civil penalty for exporting and attempting to export scrap steel to the same entity in Pakistan, on two occasions.
On July 24, BIS published a settlement agreement with Technetics Group Singapore Pte., Ltd. in connection with five violations of the EAR. Technetics released manufacturing instructions for edge-welded metal bellows, used in semi-conductor manufacturing, to two Chinese national employees in Singapore. Technetics also sold, transferred, and forwarded bellows controlled under the EAR to a customer in China. In both instances, Technetics had knowledge of the violations. The company received a $110,000 civil penalty, and was ordered to conduct an internal audit.
BIS also imposed denial orders against two separate parties for convictions of violating the AECA. On July 27, BIS imposed a 10-year denial order against Steven Neal Greenoe. Greenoe was convicted on January 10, of violations of the AECA for knowingly and willfully exporting firearms controlled on the USML to the United Kingdom without the required licenses. Greenoe was sentenced to 120 months in prison, and placed on the Debarred Parties list. On the same date, BIS also imposed a two-year denial order against Universal Industries Limited, Inc. The company was convicted of violating the AECA for knowingly and willfully attempting to export military aircraft parts controlled on the USML to Singapore without the required license.
As shown by the cases above, the U.S.is serious about prosecuting persons who knowingly, and willfully violate U.S. export regulations. However, even transactions not deemed to be “knowing” or “willful” can result in significant penalties, remedial measures, or denial orders. Consequently, exporters should remember that any unauthorized activity can subject companies to significant civil or criminal consequences.