Export Restrictions And The Bureau Of Industry And Security – Don’t Let This Happen To You

One of the problems with the Federal law that restricts the Department of Commerce from advertising about its products and services in anything but its own publications is that the law makes it difficult for DOC agencies that TV advertising in I enforce certain laws to make those laws known to the business community. The case of the Bureau of Industry and Security is a classic example of that problem in action.

The Department of Commerce’s Bureau of Industry and Security recently posted a 48 page document aptly named “Don’t Let This Happen to You!, ” on their Website. The publication lists a series of successful prosecutions and settlements the BIS made against American companies for violating export restrictions put in place before and after 9/11. Fines ranged up to $8.5 million dollars, in addition to jail time and other sanctions. You have only to look at the list of companies the BIS targeted to know that the BIS means business. Corporate names on their hit list include Federal Express, Silicon Graphics, Pratt & Whitney, Fujitsu, Sun, Rockwell and IBM (who was subject to an $8.5 million fine).

So what exactly is the BIS? Essentially, it’s a government bureau set up to enforce the Export Administration Regulations (EAR) enacted by Congress. According to their Website, “The Bureau of Industry and Security is charged with the development, implementation and interpretation of U.S. export control policy for dual-use commodities, software, and technology. Dual-use items subject to BIS regulatory jurisdiction have predominantly commercial uses, but also have military applications.”

One of the problems businesses face with the new restrictions is that they apply to events well beyond the usual export process. Under the “deemed export” rule, an export of technology is “deemed” to take place when it is released to a foreign national within the United States. Technology is “released” for export when it is available to foreign nationals for visual inspection (such as reading technical specifications, plans, blueprints, etc.); when technology is exchanged orally; or when technology is made available by practice or application under the guidance of persons with knowledge of the technology. Technology is defined as specific information necessary for the “development,” “production,” or “use” of a product.

That covers a lot of ground. As if that weren’t broad enough, the BIS also has what it refers to as a “Catch-All” rule. The BIS controls exports of items not only based on their technical specifications, but also based on their intended end-use and end-user. The Export Administration Regulations (EAR) impose license requirements on exports of items subject to the EAR if the exporter knows or has reason to know that any of the items will be used in an end-use of particular concern to the U.S. Government, such as a missile or nuclear weapons program. These controls are often referred to as “catch-all” controls because they apply to any item subject to the EAR, even if the item would not ordinarily require a license based on its technical specifications. This opens the door for a lot of companies to be prosecuted for actions that would be legal under only slightly different circumstances, This is unfortunate because the BIS has a lot of clout, and it’s willing to use it.

The BIS can subject a violator to two kinds of penalties, administrative and criminal. In the case of administrative penalties it is not even necessary for the BIS to prove intent to commit a violation. Administration penalty fines are usually $11.000.00 per violation, though in cases concerning special national security considerations the fines can be $120,000.00 per violation. The BIS usually negotiates a settlement rather than taking a company to court. In the case of voluntary self-disclosure (VSD), the fines are generally far less than the maximum allowed, a policy designed to encourage businesses to turn themselves in. In any case, the exact fine and jail sentence will depend on the BIS weighing both the mitigating and aggravating factors of the offense.

Many companies the BIS prosecuted or settled with were exporting technology that had an obvious direct or indirect military application. Bushnell was fined for exporting night vision devices to Japan and fourteen other countries and Silicon Graphics was fined for exporting high power computers to the All-Russian Institute for Technical Physics. However, in some cases companies have been fined for exporting technologies that were not obviously weapon related. A company named Bio Check was fined for exporting medical diagnostic kits to Iran. In that case it was not so much what they exported but who they exported it to. Iran is on the “entity list” of state sponsors of terrorism, a list which also includes Cuba, Iran, Libya, North Korea, Sudan and Syria. Selling legally to any of these countries can be difficult at best. And many of the smaller exporting companies may not understand that, nor care to.

Believing that posting information about recent prosecutions and settlements would have an educational, if not intimidating, effect on American export businesses, the BIS has posted a number of recent cases on its Website. These contain worthwhile information about the kinds of violations that can be prosecuted, and the penalties companies can face.

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