Avoiding Perils of ITAR Compliance and Export Control PenaltiesThere are Two ITAR compliance problems facing most businesses in the import-export industry:

  1. Failure to anticipate the road ahead

Problem: Though 79% of today’s government contractor executives say responding quickly to change is the only way to survive our current federal procurement challenges, only 1 in 3 are even able to identify threats of export control compliance violations before they strike, much less proactively position their business for growth.

Solution: Understand the real life consequences for ITAR compliance violations and take proactive measures to train your people.  Having a viable Export Compliance Manual can increase the power to reduce the impact of costly fines and exposure to the media and news gives your company the wisdom of being able to predict the future based on the type of procurement, the problems and risks that can arise and act on it. 

2. Lack of Appreciation for Fines that can Cripple Your Business

Problem: 53% of business leaders surveyed admitted their organizations are ineffective in making the right decisions about how/when to respond to procurement legislative changes and increased government oversight over export control operations.

Solution: Frequently monitor your ITAR compliance programs and make sure you’re your export control certification team and third parties through which you do business are also compliant with export control laws. Not only will you be prepared for the US government’s backlash but the risk of non-compliance and hefty ITAR penalties will be significantly reduced.

What are Some the Steps You Can Take to Avoid Export Control Compliance Problems?

Your company should take some reasonable steps to make sure that you are complying with ITAR regulations. When problems arise, the government will look to see what internal policies and controls you have in place to manage export control compliance.

Do you have an ITAR compliance checklist?

There is no getting around your company having effective procedures in place to guard against sales of sensitive or dual-use technology to unauthorized parties.  Your internal procedures should be implemented in enough depth to cover the entire company, including divisions and any subsidiaries, and third parties that your corporation deals with.

Your Internal import export control compliance systems should consider some very important goals.

  • To develop contacts and good-standing relationships between the company and export agencies;
  • Get a professionally drafted Export Compliance Manual or ITAR compliance checklist
  • Getting viable updates to the government’s export control certification laws and ITAR regulations;
  • To centralize export-related questions and issues;
  • Implement standardized procedures;
  • Detect early warning and screening of all inquiries and orders;
  • Develop a viable Import Export Compliance Manual ITAR Checklist
  • To generate coherent and complete documentation of all sensitive export transactions; and
  • Train all employees engaged, either directly or indirectly, with exports.

Do you know your customer? This is one of the first things that import export companies should focus on. Part of your ITAR compliance checklist should include an in-depth background check of any customer requesting sensitive items.

The U.S. Bureau of Industry and Security has developed a detailed “Denied Persons List” as a reference tool to help your company recognize potential violators of export laws and other parties who are known to have previously engaged in illicit procurement behavior. Checking national lists should be done routinely. Such checks should include any freight forwarding companies, as well as intermediate consignees and the ultimate consignee.

Industries that you conduct frequent checks should include freight forwarding companies, as well as intermediate consignees and the ultimate consignee.

Real Export Control Compliance & ITAR Penalties Cases

The following are real cases that led to crippling fines and criminal sanctions for ITAR compliance violations and failure to comply with export control compliance laws.

May 16, 2015 -Illegal Trade with Iran and Sudan: In the District of Columbia, Schlumberger Oilfield Holdings Ltd. (SOHL), a wholly-owned subsidiary of Schlumberger Ltd., entered into a formal judgment memorializing the sentence requiring SOHL to pay a $232,708,356 export control violation penalty to the U.S. for conspiring to violate the International Emergency Economic Powers Act (IEEPA) by willfully facilitating illegal transactions and engaging in trade with Iran and Sudan.

June 15, 2015: Schematics of the Navy’s Nuclear Aircraft Carrier to Egypt –, Mostafa Ahmed Awwad pleaded guilty in the Eastern District of Virginia to a criminal information charging him with attempted espionage related to his attempt to provide schematics of the nuclear aircraft carrier USS Gerald R. Ford to Egypt while serving as a Navy engineer.  This was a government employee.

April 24, 2015: WMD Materials to North Korea –, Yueh-Hsun Tsai, a.k.a. “Gary Tsai”, was sentenced in the Northern District of Illinois to 3 years of probation and a fine of $250. On March 16, 2015, Hsien Tai Tsai, a.k.a. “Alex Tsai”, was sentenced to 2 years imprisonment and $100 special assessment and ITAR compliance violations. He admitted that he engaged in illegal business transactions involving the export of U.S. origin goods and machinery.

What Are Frequent ITAR and Export Control Compliance Violations? Import and export companies that may have good ITAR compliance program can be found to violate US International Traffic in Arms regulations. Never depend on the fact that you have a good export control compliance program to avoid fines and penalties. The government is getting tougher on export control violations.

Willful Failure to Comply with ITAR regulations

Companies that show evidence of willful failure to comply with ITAR compliance regulations, can still face jail time. Once your company is familiar with the requisite ITAR regulations, you don’t have a choice but to comply with them. Failure to comply can be translated into a willful failure and warrant ITAR penalties. See information about the Arms Export Control Act of 1976.

Unintended Mistake: It is not unusual to make what most people would call a simple mistake in the ITAR and import-export industry. However, you are also subject to the disclosure regulations. Doing so may help you to minimize exposure to significant civil or criminal penalties.

Misrepresentation and Factual Omissions: If you found to be noncompliant with ITAR regulations for making a factual omission or material information, or somehow misrepresent facts to the government you can be subject to harsh Export Control and ITAR compliance penalties. This includes omissions at any point in the registration, licensing, or reporting processes. Find out more about eccn number ear99 requirements.

Get Your Company On Track, Develop a viable Export Compliance Manual, and Avoid the Headline and Strict Export Control Penalties.

See How We Can Help You With ITARS and Export Control Matters

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