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August 17, 2009 

BIS Imposes Civil Penalties on U.S. Exporter and Export Controls Compliance Employee

The Commerce Department's Bureau of Industry and Security (BIS) has imposed a civil penalty on a U.S. manufacturer and an employee with export control compliance responsibilities for unlicensed exports of high performance semiconductor components to China.

RF Micro Devices, Inc. (RFMD), a Greensboro, N.C.-based manufacturer of high-performance semiconductor components, has agreed to pay a $190,000 civil penalty to settle allegations that it exported spread-spectrum modems in violation of the Export Administration Regulations (EAR) to the People's Republic of China. The unique aspect of this case, which was voluntarily disclosed by RFMD, is that BIS also imposed a $15,000 civil penalty on a RFMD manager with export compliance responsibilities for making false and misleading statements to BIS Special Agents during the investigation of RFMD.

BIS alleged that during 2002 and 2003 RFMD made 14 unlicensed exports of spread-spectrum modems, classified under Export Control Classification Number (ECCN) 5A001, to the People’s Republic of China with knowledge that a violation of the Regulations was occurring, was about to occur or was intended to occur in connection with the spread-spectrum modems. In addition, BIS alleged that on 13 occasions RFMD made false or misleading statements in connection with the submission of Shipper’s Export Declarations (SEDs). ECCN 5A001 covers controlled telecommunications systems, equipment, components and accessories. Certain products classified in ECCN 5A001 are controlled for National Security reasons and require an export license to China.

BIS also alleged that, in 2004, a RFMD manager with export control compliance responsibilities told a BIS investigator that an outside export control consultant had confirmed that RFMD’s products were not export-controlled to any region where the company was marketing or selling its products. However, BIS alleged that the RFMD manager "had been repeatedly advised that certain RFMD products may have been classified under the Commerce Control List and that these products may have required an export license."

In announcing this case, Kevin Delli-Colli, the Acting Assistant Secretary of Commerce for Export Enforcement said that "unlawful shipment of state-of-the-art micro devices is a serious national security concern.” Delli-Colli also added that "companies that voluntarily disclose violations must provide truthful and complete information to investigators. Self-serving, false or misleading statements only serve to further undermine corporate credibility.”

This is one of the very few cases in which a company's export compliance manager has been assessed civil penalties in an export enforcement case.

Update: The proposed charging letter and settlement documents in this case can be found here (employee) and here (RFMD).

The proposed charging letter issued to RFMD indicates that the controlled products exported to China were RF3000 and RF3002 spread-spectrum modems, classified under ECCN 5A001, despite being advised by an export controls consultant that a review of the classification and export control requirements of such products were "a priority issue for the company". BIS also charged the company with "acting with knowledge" of violations since the company had been advised of the possible licensing requirements. RFMD was also charged with 14 counts of making a false statement on a SED (now EEI) by indicating that no license was required (NLR) to export the products from the U.S.

The proposed charging letter issued to the RFMD manager with "export control compliance" responsibilities indicated that the employee advised a BIS special agent that "she had been advised . . . by an outside export controls consultant that had been hired by RFMD, that all of RFMD's products were classified as EAR99 and were not export-controlled to any region in which RFMD was marketing or selling its products." The employee also had been advised by the outside export controls consultant "on multiple occasions . . . that RFMD's export control classification review was incomplete."As a result, the employee was charged with one count of making a false statement to BIS in the course of an investigation and agreed to pay a $15,000 penalty to settle the matter.

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excellent post on your Blog on an important topic.


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