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August 17, 2009 

BIS Imposes $610,000 Penalty on Houston Company for Unlicensed Exports of Controlled Valves

In yet another export enforcement case involving controlled valves, the Commerce Department's Bureau of Industry and Security (BIS) announced late last week that FMC Technologies, Inc., a Houston-based provider of specialty products and services to the oil and gas sector, agreed to pay a $610,000 civil penalty to settle allegations that it exported controlled valves in violation of the Export Administration Regulations (EAR).

BIS said that FMC voluntarily disclosed the violations and cooperated fully with the investigation.

BIS alleged that between 2003 and 2007 FMC made 78 unlicensed exports of butterfly and check valves classified under Export Control Classification Number (ECCN) 2B350.

ECCN 2B350, which covers many valves and other type of equipment used in the chemical industry, is one of the most common ECCNs subject to BIS enforcement actions.

In its press release, BIS quoted Kevin Delli-Colli, Acting Assistant Secretary of Commerce for Export Enforcement, as saying that an "effective compliance program is only as good as its last revision" and "not staying up to date with regulatory changes can lead to violations of the export regulations." This statement apparently refers to the final rule issued by BIS on April 14, 2005 that amended the EAR to significantly increase the country scope of chemical/biological (CB) controls on chemical and biological equipment and related technology included on the Australia Group control lists.

As a result of the 2005 change, exports of products classified as ECCN 2B350 require an export license to all countries, except the 40 members of the Australia Group. Export licenses are required to export products classified in ECCN 2B350 to such common destinations as China, India, Israel, Russia, Taiwan and the United Arab Emirates. Many exporters, however, did not update their export compliance programs and internal controls to implement the 2005 changes to determine whether an export license was needed prior to exporting valves and other products controlled by ECCN 2B350. This breakdown in compliance has led to numerous BIS enforcement cases. Additional enforcement cases involving products covered by ECCN 2B350 are expected.

ECCN 2B350 was most recently amended by BIS on July 6, 2009 to implement recent changes made by the Australia Group.

Update: The proposed charging letter and settlement documents in this case, which can be found here, indicates that FMC was charged with six counts of making unlicensed exports of ECCN 2B350 check and butterfly valves to China, Mexico, Tunisia and Venezuela following the issuance of the April 2005 final rule noted above. FMC was also charged with making 72 unlicensed reexports of 2B350 butterfly valves from the company's warehouses in Singapore, UAE and the UK to 18 countries.

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