ITAR & EAR fines are hefty
Recent export reforms to the U.S. Department of State’s (DoS’s) International Traffic in Arms Regulations (ITAR) are expected to make it easier for the U.S. companies to compete globally as the reforms will enable previous ITAR-protected items to be exported to 36 more countries. However, companies continue to slip up and find themselves saddled with multi-million dollar fines that could be avoided with better due diligence and training of personnel from management on down. Below are some recent violations of the ITAR and the Department of Commerce's (DoC's) Export Administration Regulations (EAR) I found on U.S. government websites.
For ITAR violations I went to the DoS website for Consent Agreements — http://www.pmddtc.state.gov/compliance/consent_agreements.html. Consent Agreement outlines the measures required to enhance compliance programs for companies that violate ITAR, according to the DoS website.
When it comes to violations ignorance is no excuse and neither are good intentions. Even companies that voluntarily disclose their violations will still have to pay something. Export attorneys are expensive, but a lot cheaper than the fines below.
In 2014 two companies were hit ITAR violations and levied hefty fines. Intersil Corp. in Milpitas, Calif., got hit with a $10 million fine and Esterline Technologies Corp. in Bellevue, Wash., was socked with one for $20 million.
According to the proposed charging letter, consent agreement, and order Intersil was charged 282 violations of the Arms Export Control Act (AECA) and ITAR. It was noted that the company voluntarily disclosed the violation to the DoS and if it meets the DoS terms $4 million of its $10 million fine will be suspended. For more, click here: http://www.pmddtc.state.gov/compliance/consent_agreements/IntersilCorp.html.
Esterline was charged with 339 violations of the AECA and ITAR made by various subsidiaries of the company, proposed charging letter, consent agreement, and order. If the company meets the DoS terms $10 million of the $20 million fine will be suspended. To read more, click here: http://www.pmddtc.state.gov/compliance/consent_agreements/Esterline.html.
The biggest fine levied in 2013 was against Meggitt USA in Simi, Calif., for $25 million for 67 violations of the ITAR and AECA, proposed charging letter, consent agreement, and order. DoS agreed to suspend $22 million of the fine if Meggitt met its compliance obligations. To read more, click here: http://www.pmddtc.state.gov/compliance/consent_agreements/meggitt.html.
For a story on some big ITAR fines before 2013, click here.
Violations of the EAR can be found on the website of the Bureau of Industry and Security (BIS), which is part of the DoC at http://efoia.bis.doc.gov/index.php/electronic-foia/index-of-documents/7-electronic-foia/227-export-violations.
Two from 2014 on this website that had relevance in our industry were fines levied against Amplifier Research Corp. in Souderton, Pa. (also known as AR RF) and Wind River Systems in Alameda, Calif., for $500,000 and $750,000 respectively. Both companies were charged – 58 violations by Amplifier Research Corp. and 55 by Wind River systems – with export violations that included charges of exporting its products to proscribed countries such as the People’s Republic of China and Russia, according to the BIS website.
According to the BIS violation document for Amplifier Research Corp., the company’s $500,000 fine will be suspended for two years and eventually waived if it meets all the compliance obligations ordered by the DoC. For more information, click here: http://efoia.bis.doc.gov/index.php/component/docman/doc_download/909-e2359?Itemid=.
According to the BIS violation documents for Wind River Systems, the company voluntarily disclosed its violations, but will still have to pay the fine. For more information, click here: http://efoia.bis.doc.gov/index.php/component/docman/doc_download/959-e2394?Itemid=.