On February 24, 2014, the U.S. Department of Commerce's Bureau of Industry and Security ("BIS") and Intevac, Inc. ("Intevac"), entered into a voluntary settlement agreement regarding alleged violations of the Export Administration Regulations ("EAR"). Under the EAR, the release of controlled technology to an FN in the United States is "deemed export" to that FN's home country. Under this "deemed export rule," organizations in the United States must apply for an export license if: (1) they intend to release or allow the release of controlled technology or technical data to an FN in the United States, and (2) the release of this technology or technical data to the FN's home country would require an export license. In the "deemed export" context, a release could include making the technology or technical data available for visual inspection, providing instruction or guidance about the technology or technical data, allowing access to a server on which the data is stored, or even having a conversation about the technology or data.
The BIS alleged that Intevac allowed a Russian national employed at the company's facility in Santa Clara, California, to access EAR-controlled drawings and blueprints without first obtaining an export license. Further, the BIS also claimed that, while Intevac eventually applied for a license, it allowed the employee to access the controlled technology three times while the license was pending. The BIS concluded that Intevac's knowledge of these subsequent releases was an aggravating factor in its penalty determination. Finally, the BIS alleged that in 2010, Intevac allowed a Chinese national working at one of its subsidiaries in China to access EAR-controlled technology stored on an Intevac server in Santa Clara, California.
There are several important reminders for employers from this settlement. First, deemed export liability can attach regardless of where the FN who receives the improper release is located. He or she can be inside or outside the United States when the illegal release occurs. Second, sponsoring employers must carefully consider whether an export license is required for the FN to assume the anticipated responsibilities. Indeed, the USCIS petition form now requires the sponsoring employer to certify whether an export license is required, and the BIS uses the answers on this form in developing proof of the violations and determining the appropriate fine in the event of a violation. Third, this BIS fine proceeding serves as a reminder to employers that sponsor FNs that they must have proper compliance procedures in place to mitigate the risk of deemed export violations if they have controlled technology stored on servers. Finally, the fines imposed by the BIS for deemed export violations can be substantial. In this case, the BIS fined Intevac $115,000, but the failure to obtain an export license can result in civil fines of up to $500,000 per violation. Also, willful violations can result in criminal liability, including up to 20 years in prison, and a criminal fine of up to $1,000,000, per violation. Thus, it is important for organizations to factor possible deemed export liability into their risk management policies and procedures.