Archive for the ‘China’ Category

If OFAC Denies Your License Application…Stop!

Friday, September 11th, 2015 by Danielle McClellan

2015/09/11

By: Danielle McClellan

Great Plains Stainless Co. (GPS) of Tulsa, Oklahoma has agreed to pay $214,000 to settle allegations that it violated the Office of Foreign Assets Controls (OFAC) regulations in 2009. GPS sold goods that its Chinese vendor shipped from Shanghai to GPS’s customer in Dubai via MN Sahand, a vessel that is considered blocked property (EO 13382). GPS also created new bogus trade documents, with references to the blocked vessel to be removed and then transferred these altered documents to its Dubai customer to facilitate the release of the goods that were held at the port in Dubai.

GPS did not voluntarily disclose these violations to OFAC, the maximum penalty could have been $500,000. The settlement amount is reflective of the following:

  • GPS acted willfully since they altered the bill of lading
  • They disregarded verbal and written guidance from OFAC stating that the company should consult with OFAC’s Licensing Division before engaging in the transaction
  • GPS had submitted a license application to OFAC seeking authorization for this transaction and was denied but followed thru with the transaction
  • They did not have a compliance program in place at the time of the alleged violations.
  • The company has not received a penalty notice or Finding of Violation from OFAC in the past five years
  • GPS had no reason to know that the blocked vessel was to be used for the shipment until the vessel’s sailing date
  • They are a small company
  • GPS took remedial measures to prevent future violations

Read the full document at: http://www.treasury.gov/resource-center/sanctions/CivPen/Documents/20150724_gps.pdf

$500,000 Penalty for Illegal Pump Exports

Friday, September 11th, 2015 by Danielle McClellan

2015/09/11

By: Danielle McClellan

Lewis Pumps Division d/b/a Weir Minerals Lewis Pumps (Envirotech) has been fined $500,000 for exporting globe, gate, and butterfly valves (ECCN 2B350) to China, Russia, and other illegal destinations without licenses. The charging letter indicates that between December 2007 and July 2011 the company exported these items on 32 occasions at an approximate value of $1.4 million.

The $500,000 fine isn’t as bad as it may seem. Envirotech must pay $150,000 up front and the remaining $350,000 will be suspended and waived after two years as long as the company doesn’t commit any violations during those two years. What may be much more painful than the $150,000 fine, the company has agreed to two audits of their export compliance program. The results of the audit must be submitted to the Department of Commerce. The first audit will cover the 12 month period prior to the Order (July 2015) and must be received by BIS no later than 3 months from the Order. That’s a quick turnaround for a comprehensive audit not to mention that the Order states that the audit will be, “substantial with the Export Management and Compliance Program (ECMP) sample audits module, and shall include an assessment of Envirotech’s compliance with the regulations.”

Order and Charging Letter: http://efoia.bis.doc.gov/index.php/component/docman/cat_view/18-export-violations/34-export-violations-2015?Itemid=

Company Fined $75,000 for Exports to End User of Entity List

Friday, September 11th, 2015 by Danielle McClellan

2015/09/11

By: Danielle McClellan

Teledyne LeCroy, Inc. of Chestnut Ridge, NY has been charged with two violations of the Export Administration Regulations (EAR) and fined $75,000. On two separate occasions between January 27 and April 14, 2010 the company exported oscilloscopes (ECCN 3A292.d) to Beihang University of Aeronautics and Astronautics (BUAA) in Beijing without a license. BUAA was added to the Entity List on September 16, 2005 and Teledyne LeCroy was aware of this listing when they sold and exported the oscilloscopes.

Teledyne LeCroy not only failed to obtain a BIS license they also failed to file accurate Shipper’s Export Declarations which is no surprise, why would they indicate an ultimate consignee that is on the Entity List. The company was assessed a penalty of $75,000 for the two charges.

Charging Letter: http://efoia.bis.doc.gov/index.php/electronic-foia/index-of-documents/7-electronic-foia/227-export-violations

Company to Pay an Extra $400k for Shipping Items on an Iranian Vessel

Friday, September 11th, 2015 by Danielle McClellan

2015/09/11

By: Danielle McClellan

John Bean Technologies Corporation (JBT) of Chicago, IL has agreed to pay $391,950 to settle alleged violations of sanctions against weapons of mass destruction proliferators and their supporters that occurred between April 8-17, 2009. The company shipped items sold to a Chinese company by Islamic Republic of Iran Shipping Lines aboard a blocked vessel from Spain to China. JBT provided trade documents pursuant to a letter of credit for $2,897,936 related to the shipment to a US bank for payment but the US bank declined and advised that an OFAC license was required. JBT then presented the trade documents to a Spanish bank (Banco Santander) for the same amount to receive the payment. JBT reimbursed its foreign subsidiary, JBT AeroTech Spain, for charges paid to their freight forwarder along with the associated Spanish bank fees.

The base penalty for the violations was $670,000 but the following factors reflect OFAC’s considerations regarding the $391,950 penalty.

Aggravating Factors:

  • JBT did not voluntarily self-disclose
  • JBT Management knew of some of the conduct at hand
  • There was an economic benefit in dealing with the blocked entity
  • JBT is a sophisticated entity that conducts business around the world

Mitigating Factors:

  • JBT has not had any violations in the last 5 years
  • JBT implemented remedial measures
  • The company provided employee training and compliance program enhancements along with improved party screening
  • JBT cooperated with OFAC’s investigation
  • The company agreed to toll the statute of limitations for 514 days.

Read More: http://www.treasury.gov/resource-center/sanctions/CivPen/Documents/20150619_jbt.pdf

Kintetsu World Express Agrees to $30,000 Fine for Exporting to Chinese Entity on the SDN List

Monday, November 24th, 2014 by Brooke Driver

2014/11/24

By: Brooke Driver

Kintetsu World Express of East Rutherford, New Jersey, has settled for $30,000 with BIS for a violation taking placing in May 2010. The settlement agreement states that KWE stands accused of acting as a freight forwarder for the China National Precision Machinery Import/Export Corporation locating in Beijing.  Apparently, KWE transported three spiral duct production machines and related accessories to the CNPMIEC, an entity placed on the Specially Designated Nationals and Blocked Persons List in 2006 for supplying Iran’s military and Iranian proliferators with missile-related dual-use items, without performing the proper screening—or, in fact, any screening at all.

It seems that BIS chose to enforce only a fairly low fine due to the facts that there was only one charge against KWE and the violation appears to have been purely a mistake, rather than an intentional avoidance of U.S. law. However, this case acts as an example to exporters everywhere that you will be held accountable and suffer the consequences for mistakes resulting purely from ignorance. It is essential that you incorporate regular screening against blocked parties lists into your compliance program.

Chinese Man Attempts to Smuggle 51 Turtles in His Pants across the Canadian Border

Monday, November 24th, 2014 by Brooke Driver

2014/11/24

By: Brooke Driver

Now here’s one you don’t hear every day, folks. Recently, Kai Xu, a Chinese-born Canadian citizen and engineering student at the University of Waterloo, attempted—unsuccessfully, of course—to smuggle 51 turtles of various species across the Detroit-Windsor border into Canada…in his pants.

And while the incident sounds more like a Road Runner episode than an export enforcement case, turtle smuggling is apparently a more common problem than you’d think, with a high demand for turtles as food or pets and one species—which was represented in the unfortunate hostages in Xu’s sweatpants—worth as much as $800 a pop.

And apparently, this is not the first time Xu has attempted to smuggle these animals (although, for his sake, we hope this was the first time the turtles were strapped to his legs and groin—ouch!). This is one in a series of incidents involving the 26-year-old Xu, who was also recently arrested, along with accomplice Lihua Lin, for attempting to fly to Shanghai with over 200 turtles hidden in Lin’s suitcase.

And while the crime is rather funny, the potential consequences aren’t. Xu, charged with smuggling, illegal trading and exporting could serve up to ten years behind bars for his crimes.

The (assuredly traumatized) turtles in question have been seized and placed with Fish and Wildlife Service agents, where they will hopefully lead a peaceful and pants-free life from now on.

Bass Pro Fined for Illegal Rifle Scope Exports

Wednesday, July 16th, 2014 by Brooke Driver

2014/07/16

By: John Black

What? Bass Pro Shops, the favorite store for all my redneck buddies and family members got busted for sending scopes to the Chinese Communists? What in the world can be next?

BIS announced on the 10th of June that it has settled with the outdoors retail giant Bass Pro over its nine alleged violations of the Export Administration Regulations. According to BIS, during the period between June 2, 2010 and June 29, 2011, Bass Pro exported controlled optical sighting devices with a total value of $3,513 to end users in Canada, China and Cyprus without first attaining the necessary licensure. These items are controlled for Firearms Conventions reasons when exporting to Canada and Crime Control reasons when exporting to the two other countries.

Although the total amount of the shipments was fairly low, BIS has decided to enforce a $25,000 penalty, likely due to the number of countries involved in the illegal transactions.

Intersil Corp Pays $10 Million for 339 ITAR Violations

Wednesday, July 16th, 2014 by Brooke Driver

2014/07/16

By: Brooke Driver

On June 16, the State Department released its decision to settle with Intersil Corp of Milpitas, CA over its 339 violations of the AECA and ITAR, which apparently took place between 2005 and 2010. The numerous violations seem to have occurred due to ignorance of U.S. policy and insufficient recordkeeping and specifically include exports without DDTC approval, failure to maintain end-use records prior to 2010 and violations resulting from improper classification of USML items as CCL items. Based on the follow factors, the DDTC decided to require a $10,000,000 fine in this case ($4 million of which shall be suspended, assuming it is spent on corrective actions):

• Intersil disclosed the violations in question
• Intersil cooperated fully with the resulting investigation, and offered to settle
• Intersil has taken immediate steps to correct its mistakes and create a stronger compliance program
• Intersil’s exports to China may have contributed to the country’s commercial and military satellite programs and potentially harmed U.S. national security

In addition to the substantial monetary penalty, the DDTC has required that Intersil make the following steps to improve its compliance program:

• Incorporate corrective actions upon the acquisition of any new business entity engaged in ITAR-regulated activities
• Notify the DDTC 60 days prior to sale of any entity engaged in ITAR-regulated activities and inform purchaser of corrective action requirements
• Ensure adequate resources are dedicated to ITAR compliance, including lines of authority, staffing increases, performance evaluations, career paths and promotions and compensation
• Appoint an Internal Special Compliance Officer
• Ensure that the VP/General Counsel briefs the board annually concerning findings and recommendations of ISCO
• Retain outside consultant to conduct initial comprehensive audits of ITAR-regulated business units; follow two years later with additional audits to determine whether corrective actions were adequately implemented

Intevac, Inc. Settles for $115,000 with BIS Over Deemed Export Violations

Monday, March 31st, 2014 by Brooke Driver

2014/03/31

By: Chad Wolfe

Intevac, Inc. settled in February for several violations of the EAR stemming from the illegal export of controlled technical data. Over the course of 5 years (from May 2005-July 2010), Intevac provided controlled technical data, classified ECCN 3E001, to foreign nationals within the United States and to its subsidiary in China. Specifically, Intevac provided access to the company mainframe to foreign nationals of Russia and China. In both instances, the transaction required authorization from BIS. (See the charging letter for details.)

At the heart of this violation and subsequent fine are the common pitfalls of engaging with foreign nationals with controlled technical data and deemed export rules. The fact that Intevac did voluntarily Self-Disclose the violation and still received a fine and potential debarment gives you an idea of how seriously DOC is taking violations post-reform.

Deemed Exports can be difficult to wrap your head around, but remember to separate the person and his or her nationality. That is not Larry the engineer; he is the foreign national that works in your engineering department. Having foreign nationals working in the U.S. as full time regular employees is becoming more and more common, and will put you and your company at an increased risk.

Some tips on how not to end up like Intevac:

  1. Know what nationalities are working at your facility and understand what requirements are needed to share information. Unfortunately, there isn’t a “one size fits all” approach to this; 3E001 is NLR to Canada, but requires a license to every other country.
  2. Don’t fall into the “we’re out of time” excuse and make a bad decision. Not providing the technical data may cause a deadline to slip, but I imagine things are moving awfully slow at Intevac these days. Making sure everything is in place might add time to the process, but being found guilty of violating the EAR will absolutely add time to the process. Rest assured that someone within your organization knew the particulars about this project long before you were in the loop, so don’t let them pressure you now or blame you for the slippage, because you are doing the right thing.

Some reasons things went so badly for Intevac:

  1. They knew their technical data was controlled. They had the good sense to create a secure location for their technical data. Unfortunately, they provided the credentials needed to gain access to foreign nationals. At some point in May of 2005, someone within Intevac must have realized this was a licensable activity, and they applied for authorization to cover the initial deemed export to Russia, but apparently BIS was taking too long, so at the end of June, they went ahead and exported more data via the same means as before.
  2. Lastly, and more damaging, they acted with knowledge, and-for all those keeping track at home-this is the kind of thing that will get you hammered by DOC. Honest mistakes are one thing; acting with knowledge will get you a fine and potential debarment almost every time. As if that weren’t enough, in May of 2010 (not sure what happens at this place in May, but that doesn’t seem to be their month), Intevac exported the same type of technical data to its subsidiary in China-you guessed it-without a license. Once again, the foreign national was provided login information from the U.S. arm to gain access to the data.

Deemed Exports happen every day and are nearly impossible to stop. You must train your teams and your management so that they understand that this is a violation and that any perception of time savings is just not real. The EAR and ITAR clearly explain that providing technical data to a foreign national constitutes an export. Know your data and know your recipient and avoid ending up in articles like this one.

Export Coordinator Gets Prison Time for EAR Violations

Thursday, March 13th, 2014 by Brooke Driver

2014/03/13

By: Brooke Driver

“Play nice” may have been a lesson you learned in preschool, but the rule still applies—as shown recently in the case of Amplified Research Corporation. The Pennsylvania company’s former export coordinator Timothy Gormley was sentenced to 42 months in prison and 10 years debarment this January for his illegal shipments of U.S.-controlled amplifiers to Hong Kong, the People’s Republic of China, Taiwan, Singapore, Thailand, Korea and Malaysia. Apparently, the total value of the amplifiers, which are controlled due to their potential military applications as radar jammers and weapons guidance systems, was nearly $3,000,000. Twenty-five of the fifty illegal exports were to the People’s Republic of China.

Gormley certainly paid the price for his crimes, but what about his company? Amplified Research itself seems to have gotten off nearly scot free, which is rather surprising considering the high number of violations and the value of the products involved in the case. Eric L. Hirschhorn, Undersecretary of Commerce for Industry and Security, took note of Amplified Research’s cooperation with BIS throughout its investigation, including the company’s submission of a voluntary self-disclosure describing Gormley’s action. As a result, BIS has decided to waive the $500,000 fine, assuming Amplified Research does not violate the regulations in the next two years, and only requires that the company perform an outside audit. Lesson learned? Cooperation will go a long way in lessening the consequences of a violation.