Export News and Regulations

Exporters Behaving Badly: Real World Export Compliance Horror Stories

There are many rewards involved in doing business globally. Exporting gives companies access to larger markets and the chance to increase profits. But export compliance is a tricky business and the ramifications of an export violation can be severe.

Consider these three recent cases:

The Case of the e-Bay Seller and the Gunsights

First we present you with the troubling case of a 41 year old and her side-business on e-bay. The woman in question was gainfully employed by a government contractor and working at Fort Hood in Texas. As a way of earning more money, she sold surplus military equipment and clothing legally purchased at Fort Hood on e-bay. All innocent enough perhaps.  But when she purchased two Advanced Combat Optical Gunsights (ACOGs) and sold them to a client in Germany without proper classification determination, she committed an export violation that changed her life. ACOGs are listed on the U.S. Munitions List (USML) and therefore require a license. The woman claimed to be unaware of the law but ignorance is no defense.

She was sentenced to 6 months imprisonment and had to pay a fine of almost $200,000. Her e-bay store is closed for business.

The Misadventures of the Russian National in Silicon Valley – A Tale of Deemed Exports

In our next example of exporting woe, we take you to the Silicon Valley in California and a successful technology firm with a reputation for cutting edge research. The firm in question specializes in the design and development of high-productivity, thin film processing systems. With a reputation for world-class research in a competitive and specialized industry, they employ the best researchers and engineers available both inside and outside the States. This is where the company in question found themselves in murky waters. They hired a Russian national to work as an engineer in their California headquarters. The Russian gentleman in question had access to blueprints, drawings and part numbers – all required to do his job. The problem was this involved a ‘deemed export’ – the release of controlled technology to a foreign national in the U.S.

The company was charged with five violations of the Export Administration Regulations (EAR) and reached a settlement of $115,000 with the Bureau of Industry and Security (BIS). The Russian went home.

The IT specialist and the Broken Embargo

In our final story, we will introduce you to a brilliant 42 year old IT technician in Seattle. Computer savvy as he may have been, he was obviously unaware that exporting brings its own level of complexity. The world of technology is competitive and global and his company was looking to grow. Not wanting to turn down any opportunity, his company contracted with a firm in Iran to provide computer equipment and training. In doing so, he violated the United States embargo of Iran. It was a clear case of export violation.

The IT specialist plead guilty and was sentenced to 30 months in federal prison for conspiracy to violate the International Emergency Economic Powers Act. His company was sentenced to one year probation.

In these three seemingly unrelated stories of export woe, the one common factor is that they all could have been avoided. It is essential exporters have the tools and knowledge required to navigate the world of export compliance safely. If you export, it is your responsibility to know the rules and to do your due diligence BEFORE you send. Let these harrowing tales of export transgressions be a warning!