What happens if I violate export controls in the USA? (January – December 2021) >>

What happens if I violate export controls in the USA? (January – December 2021)

BIS Reaches settlement with Photonics Industries International Inc

The U.S. Department of Commerce’s Bureau of Industry and Security (BIS) has announced that Photonics Industries International, Inc., of Ronkonkoma, New York, has agreed to pay a civil penalty of $350,000 (with $50,000 payable within 30 days and payment of the remaining $300,000 suspended for a period of two years and then waived if the company has not committed any further violations) to settle the following charges:

  • Charges 1-3 15 C.F.R. § 764.2(a) – Engaging in Prohibited Conduct: On three occasions, on or about December 13, 2014, December 17, · 14, and December 20, 2014, respectively, Photonics engaged in prohibited conduct prohibited when it exported RGH-1064-30 picosecond laser systems, items subject to the EAR, to the People’s Republic of China (“China”) without the required BIS licenses. Specifically, Photonics exported 16 such laser systems on or about December 13, 2014, two such laser systems on or about December 17, 2014, and seven additional such laser systems on or about December 20, 2014. At the time of each of these exports, the items were classified under Export Control Classification Number (“ECCN”) 6A005.b.6.b, and controlled for National Security (“NS”) and Anti-Terrorism (“AT”) reasons. Based upon the NS control for the items, a license was required, pursuant to EAR § 742.4, to export them to China. However, no license was sought or obtained for the above-described exports. In transaction documentation for these unlicensed exports to China, Photonics erroneously listed the ECCN applicable to the items as EAR99 and indicated that no license was required for the exports. Photonics had not sought a commodity classification relating to the items from BIS, but, instead, purportedly mistakenly self-classified the items as EAR99. Photonics also directed a freight forwarder to file Electronic Export Information (“EEi”) in the Automated Export System in connection with each of these exports that listed Hong Kong as the ultimate destination and a Hong Kong freight forwarder as the ultimate consignee. Photonics assertedly did so at the request of its customer but knew that China was the actual ultimate destination and that the actual ultimate consignee was located in Shenzhen, China.
  • Charge 4 15 C.F.R. § 764.2(c) – Attempt: On one occasion, on or about December 30, 2014, Photonics engaged in prohibited conduct when it attempted to export eight RGH-1064-30 picosecond laser systems, items subject to the EAR, classified under ECCN 6A005.b.6.b, controlled for NS (and AT) reasons, to China without the required BIS license. A license was required, pursuant to EAR § 742.4, to export the items to China, but no license was sought or obtained for this attempted export. In transaction documentation for this attempted unlicensed export to China, Photonics erroneously listed the items as EAR99, apparently based on its mistaken self-classification of the items, and indicated that no license was required for the export. Photonics also directed a freight forwarder to file EEI in the Automated Export System in connection with this attempted export that listed Hong Kong as the ultimate destination and a Hong Kong freight forwarder as the ultimate consignee. Photonics assertedly did so at the request of its customer but knew that China was the actual ultimate destination and that the actual ultimate consignee was located in Shenzhen, China.
  • Charge 5 15 C.F.R. § 764.2(a) – Engaging in Prohibited Conduct: On or about May 25, 2016, Photonics engaged in prohibited conduct prohibited by when it exported a DCH-355-3 laser system, an item subject to the EAR, designated EAR99,5 to Sichuan University in Chengdu, China, without the required BIS license. Sichuan University was at all relevant times relevant (and remains) listed on the Entity List, Supplement No. 4 to EAR Part 744, and a BIS license was required to export any item subject to the Regulations to that entity. However, Photonics did not seek or obtain a license for the export of the item to Sichuan University. Although Photonics was aware of BIS’ investigation into the December 2014 transactions described in Paragraphs 1-12, supra, it still did not have in place an export control compliance program that included screening foreign customers against the Entity List (or other BIS or U.S. Government export controls lists).

Click here for the Settlement Agreement and related documentation.

BIS penalises Alsima Middle East General Trading LLC

The U.S. Department of Commerce’s Bureau of Industry and Security (BIS) has announced that Alsima Middle East General Trading LLC, also known as Al Sima Middle East General Trading LLC, of Dubai, United Arab Emirates, has agreed to pay a civil penalty of $50,000 ($12,500 payable within 30 days and the remaining 12,000, $500 suspended for a period of two years and thereafter waived if the company commits no further violations) to settle charges that it committed one violation of EAR § 764.2(g) – Misrepresentation and Concealment of Facts. On or about October 5, 2015, Alsima made false and misleading representations, statements, and certifications in connection with the submission to BIS of a license application for the export to the United Arab Emirates of powder grade nickel. The nickel powder is classified under ECCN 1C240, controlled for nonproliferation and antiterrorism reasons, and required a license to be exported to the UAE. In the submission of the license application, Alsima falsely and misleadingly represented that the nickel powder was to be used to manufacture self-lubricating seal rings in the UAE for distribution in the UAE. On or about April 18, 2016, BIS conducted a Post Shipment Verification (“PSV”) at Alsima. The company’s director stated that the nickel powder was for the manufacturing of specialized compressor rings. However, the director further clarified that Alsima had intended to export the manufactured rings to an Azerbaijani company. The director provided an invoice dated February 14, 2015 – several months before the submission of the BIS-711 and Alsima’s in-user statement, purportedly from the Azerbaijani company for the specialized compressor rings. Click here for the Settlement Agreement and related documentation.

BIS Reaches Settlement Agreement with Dutch company Kleiss & Co BV over sales to Iran

The US Department of Commerce’s Bureau of Industry and Security (BIS) has reached settlement agreement with Kleiss & Co. BV of The Netherlands, who has agreed to pay a civil penalty of US$60,000 and have its export privileges denied for two years to resolve charges that it engaged in two violations of EAR § 764.2(e) – Acting With Knowledge of a Violation. Specifically, on two occasions on or about June 28, 2016, and on or about March 15, 2017, Kleiss ordered, bought, and later concealed details of the export of extruded butyl sealants from the United States on behalf of its Iranian customer with knowledge or reason to know that a violation of the EAR had occurred, was occurring, or was about to occur in connection with the items. The extruded butyl sealants, valued at approximately US$20,951 in total and designated EAR99, are subject to the EAR. Kleiss had reason to know of the prohibitions on exporting US-origin items to Iran without US Government authorization. Specifically, on or about June 28, 2016, Kleiss & Co. ordered and/or bought extruded butyl sealants from its US supplier for a customer in Iran. The US freight forwarder returned the shipment to the US supplier, explaining to the U.S. supplier and Kleiss that they were unable to ship to Iran directly or indirectly: “We cannot ship any cargo to Iran, directly or indirectly. The primary sanctions are still in place despite the JCPOA [Joint Comprehensive Plan of Action].” Despite the previous warning from the freight forwarder, on or about September 2, 2016, Kleiss provided its U.S. supplier with new invoices for the order of extruded butyl sealants, originally purchased for its customer in Iran, and stopped by the freight forwarder, listing a new company and address in Dubai, United Arab Emirates. Kleiss removed all references to Iran from the invoices and packing list in an eff01i to conceal from the freight forwarder and the US Government the ultimate destination of the items. However, the new invoices and packing list provided to the US supplier did not change the invoice number, quantity, or price from the original documents. This order was exported from the United States on or about September 2, 2016.

BIS Reaches Settlement Agreement with TeleDynamics LLP 

The US Department of Commerce’s Bureau of Industry and Security (BIS) has reached settlement agreement with TeleDynamics LLP of Austin, Texas, who has agreed to pay a US$55,000 civil penalty to settle charges that it committed 10 violations of EAR § 764.2(b) – Causing, Aiding, or Abetting a Violation. Specifically, on ten occasions between on or about August 11, 2014, and on or about October 20, 2014, TeleDynamics caused, aided, or abetted violations of the EAR, namely the unlicensed export of rifle scopes, items subject to the EAR, classified under Export Control Classification Number (“ECCN”) 0A987, and valued at approximately US$1,047. Specifically, TeleDynamics forwarded the items for export from the United States to Russia and Ukraine. An export license was at all relevant times required to export rifle scopes to Russia and Ukraine pursuant to EAR § 742.7. TeleDynamics was aware of export licensing requirements for rifle scopes, having been notified on a number of occasions by US Customs and Border Protection that shipments of rifle scopes being forwarded by TeleDynamics were detained for not having the required export license.