The Commerce Department has adjusted its export control enforcement program. The Bureau of Industry and Security (“BIS”) announced the new administrative policies and gave notice to the industry and public. BIS is now bringing enforcement actions under this new regime.
Luis Fernando Garcia
BIS entered into a settlement agreement with Luis Fernando Garcia, the owner of GE Equipos de Seguridad, who sought to illegally export to Mexico $4000 worth of ballistic helmets and rifle scopes which are subject to the Commerce Control List. Garcia purchased the items from a Los Angeles company and gave them to a customer in Arizona who then attempted to take the items to Mexico.
The Customs and Border Protection agency stopped the car at the border and seized the items.
BIS did not impose any monetary penalty but required an internal audit of his company’s export compliance program and complete compliance training. If Garcia does not complete the audit and training, Garcia would suffer suspension of his export privileges.
The settlement agreement did not include a no-admit, no-deny clause, and Garcia admitted conducting the alleged conduct.
The audit has to cover a 12-month period and the results reported to BIS. If Garcia discovers any violations of export controls, Garcia is required to disclose the violations to BIS.
After completing an export control training program, Garcia must submit an attendance certificate. If Garcia violates the settlement or commits another violation during a two-year probationary period, Garcia would lose his export privileges.
In explaining why Garcia was not fined, BIS explained that the violation is “relatively less serious from a national security perspective.” Under BIS’ new enforcement policies, to be eligible for such treatment the subject must admit the underlying conduct and agree to remediation-oriented measures such as completion of training programs and compliance audits.
Far East Cable
BIS charged Far East Cable, a Chinese company, with violating U.S. export controls when it assisted Zhongxing Telecommunications Equipment Corporation (“ZTE”) to sell controlled items to Iran. As alleged, Far East Cable acted as a “cutout” between ZTE and several Iranian telecommunications companies to help ZTE conceal and obfuscate its business dealings in Iran. In total, BIS charged Far East Cable with 18 violations of the Export Administration Regulations.
Far East Cable is China’s largest wire and cable manufacturer and is accused of illegally exporting U.S.-origin routers, microprocessors, servers, databases and other items on the Commerce Control List to Iran without the required licenses.
After purchasing the items from ZTE, Far East agreed to sell all of the items to Telecommunication Company of Iran (“TCI”), an entity majority owned by the Iran Revolutionary Guard Corps, a sanctioned entity, and Khadamate Ertebati Rightel, an Iran-based telecommunications company.
The two customers were “longtime customers” of ZTE, and used Far East Cable as an intermediary to maintain business between ZTE and its Iran customers.
BIS charged a total of 18 violations, which could result in a total fine of more than $9.7 million. Far East Cable has 30 days to respond to the charging letter.