Export Compliance Penalties for ITAR and EAR

Export Compliance Penalties
Export Compliance Penalties

The U.S. Government continues to impose export compliance penalties for companies that commit violations.  This is the case for exports that fall under the International Traffic in Arms Regulations (ITAR) and the Export Administration Regulations (EAR).  These penalties can include both civil and criminal fines, imprisonment, and denial of export privileges.

Penalties Under the ITAR

Organizations involved in the export of defense goods or defense services that are enumerated in the United States Munitions List (USML) are subject to export controls under the ITAR.  The ITAR fall under the controls of the United States Department of State and are administered by the Directorate of Defense Trade Controls (DDTC).

As described in CFR 22 §127, it is a violation to export, reexport, transfer, or retransfer ITAR controlled articles without a written license or approval.  Furthermore, it is unlawful to misrepresent or make false statements in such export transactions.  Under 22 U.S.C 2778(c) penalties can include fines of up to $1,000,000 per violation and or imprisonment for twenty years.

Penalties Under the EAR

Export Administration Regulations place controls on the export of commodities including intellectual property, technology, and software.  These items which are enumerated in the Commerce Control List (CCL) are often referred to as “dual use” items in that they may have military as well as commercial applications.  These export controls fall under the jurisdiction of the Department of Commerce and are administered by the Bureau of Industry and Security (BIS).  

The BIS can invoke both civil penalties and criminal penalties for violations of the EAR.  Criminal penalties can include up to $1,000,000 in fines per violation and up to twenty years imprisonment.  Civil penalties, also referred to as administrative penalties, can be either $300,000 per violation or twice the transaction value, whichever is greater.  These penalties are adjusted for inflation on an annual basis.

Other Export Penalties

Aside from the two sets of regulations, the U.S. Government maintains sanctions to support the national security and foreign policy objectives.  These sanctions are often in effect regardless of an item or service’s export regulation classification.  Conducting an activity that results in the sale or transfer of an item, service, or information to a denied party or entity can result in civil fines, criminal fines, and imprisonment.

Export sanctions are enforced by the Department of Treasury’s Office of Foreign Assets Control (OFAC).   There are numerous penalties based on the relevant statue under which violations may have occurred.  These penalties are also adjusted for inflation annually.

Recent Examples of Enforcement

Companies of all sizes are being penalized for export violations.  Recently the BIS imposed a $300 million dollar civil penalty against Seagate Technologies for exporting hard disk drives to Huawei Technolgies Co. Ltd.  3D Systems, a U.S. company based in South Carolina agreed to a settlement of $20,000,000 for violations of the ITAR.  Additionally, Wells Fargo agreed to a $30,000,000 settlement with the OFAC.

CVG Strategy Export Compliance Management Systems

Export Compliance is an important subject for businesses engaged in sales of items that are intended for international sales or could result in international sales.  Unfortunately, many businesses fail to adequately engage in managing their compliance requirements.

CVG Strategy can help you establish a coherent and effective Export Compliance Management System.   We can also perform export control classifications, perform audits, and educate your export compliance team.  Regardless of whether your business falls under EAR or ITAR, CVG Strategy has the expertise to help.  Our experts can provide guidance for your export issues and questions.