# Presentation: 128113

## Office of Export EnforcementBureau of Industry and Security (BIS)U.S. Department of CommerceEdward G. HollandSupervisory Special AgentUnit ChiefInvestigations Division

**Office of Export Enforcement****Bureau of Industry and Security (BIS)****U.S. Department of Commerce**Edward G. HollandSupervisory Special AgentUnit ChiefInvestigations Division

## Digital

**Digital**
**Creations**

*IGG Corporation*

- Hercaire

**JML**
**FREIGHT**

**ATT Communications**

**TAL**
**Industries**

**RII**

- SWISSCO

**Illinois Tool Works Inc.**

- Lawrence  Livermore
- National  Laboratory

- SYNTEX

**SIGMA-ALDRICH**

*** ******PAN***
*** ******AVIATION***

**ICS**
**INC**

***INDUSTRIAL  SCIENTIFIC  CORPORATION***

**OMEGA**

**CCP**

##     Protect National Security and Foreign Policy Goals 
Prevention and Detection in Partnership with Industry
Investigation and Prosecution
Domestic and International            Law Enforcement Cooperation

- Prevention and Detection in Partnership with Industry
- Investigation and Prosecution
- Domestic and International            Law Enforcement Cooperation

- Export Enforcement’s Mission

## The role of OEE
Statutes and Penalties
Recent Cases
Root Causes of Problems
Questions & Answers

- Statutes and Penalties
- Recent Cases
- Root Causes of Problems
- Questions & Answers

- Office of Export Enforcement

## 		The enforcement arm of The Department of 	Commerce, Bureau of Industry and Security 	(BIS)

- Who Are We?

## Office of Export Enforcement Field Office Regions

- San Jose

- Los Angeles

- Dallas

- Chicago

- Boston

- New York

- Washington

- Office of Export Enforcement Field Office Regions

- Miami

- Houston

## The key to OEE’s mission is educating the exporting community about preventing violations and dealing with exporter responsibilities under the Export Administration Regulations through:
Company Outreach Visits
Seminars
Workshops

- Company Outreach Visits
- Seminars
- Workshops

- Education Component of OEE’s Mission

## The PARTNERSHIP between OEE and YOU

- 1)  We can assist you in avoiding illegal transactions.
- 2)  We can assist you in avoiding negative publicity.
- 3)  We can assist you in avoiding fines and/or imprisonment
- We can assist you in avoiding a situation where your     company has to pay enormous costs for legal representation resulting from a criminal or administrative proceeding.
**  ****Strengthening our partnership means working together to enhance our national security.   **

## Preventive Measures

- Check exporters and customers prior to  issuing license
- Check end-users and end-uses after shipment
- Use watch list to screen license applications

- Review Shipper’s Export Declarations
- Review Visa Applications
- Detentions/Seizures
- Issue Temporary           Denial Orders
- Educate Exporters - Outreach & BEET

## Enforcement Sources

- Confidential and Industry Sources
- Intelligence Sources
- Safeguards Verification Program
- Visa Application Review Program
- Export Document Review                                           (SEDs, Airway Bills,  Bills of Lading)
- Public Sources - Newspapers, Trade Publications, Internet

## Investigations and Sanctions

_**Investigations:**_
- Criminal
- Administrative
_**Sanctions:**_
- Criminal fines and imprisonment
- Civil fines and penalties (i.e. denial of export privileges, exclusion from practice, etc.)

## CRIMINAL

- CRIMINAL PENALTIES
***COMMERCE:***
- EAR - currently enforced under 50 U.S.C.,  sec. 1705 (b), IEEPA.  (EAA currently in lapse)
***OTHER STATUTES:***
- Conspiracy, 18 U.S.C. sec. 371
- Money Laundering, 18 U.S.C. 1956
- And more....

## “Willful Violations”
$250,000 fine for individuals and/or 
	Ten years imprisonment 
$1 Million or five times the value of the exports involved for firms

- $250,000 fine for individuals and/or
- 	Ten years imprisonment
- $1 Million or five times the value of the exports involved for firms

- Criminal Penalties

## Case Example 1:Miami Export Purchasing Corp.

-                           _EXPORT PURCHASING CORP_

- Case Example 1:Miami Export Purchasing Corp.

## Miami Export Purchasing Corp.

- United Arab Emirates company ordered pulsed neutron generators through a automobile export company in Miami, Florida.  The generators are controlled under ECCN 3A231.
- Miami company applied for a Commerce Department export license.
- Stated end-use was for oil well logging, but model ordered was for lab use.

## Miami Export Purchasing Corp.

- Commerce initiated a pre-license check through our embassy in the UAE.
- U.S. Embassy reported back that the stated end-user listed on the license did not order the pulsed neutron generators.
- Export Enforcement arrested the Miami man that signed the license application for making false statements and conspiring to violate U.S. export control laws.

## Case example 2:Berkeley Nucleonics Corporation

## Berkeley Nucleonics Corporation of San Rafael, California, was indicted August 28, 2001, by a federal grand jury.
One count of conspiracy in violation of Title 18, United States Code, Section 371.
Six counts of violations of Export Administration Regulations regarding exports to India.

- One count of conspiracy in violation of Title 18, United States Code, Section 371.
- Six counts of violations of Export Administration Regulations regarding exports to India.

**Berkeley Nucleonics Corp.**

## Berkeley Nucleonics Corp.

-    (BNC) and three of its employees solicited business for and knowingly exported nuclear pulse generators and related parts to various entities in India without the export license required by the Department of Commerce

## Berkeley Nucleonics Corp.

- The entities to which BNC is alleged to have shipped the nuclear pulse generators:
**Bhaba Atomic Research Center** (BARC)
**Nuclear Power Corporation** (NPC)
- BARC and NPC are divisions of the Government of India's Department of Atomic Energy and—at the time of shipment—were on the Department of Commerce's **Entities List**.

## David Brown, company president, indicted
Richard Hamilton, marketing director, indicted
One count of conspiracy
One count of violating the Export Administration Regulations.
Vincent Delfino, former Operations Mgr., indicted One count of conspiracy
Six counts of violating the Export Administration Regulations.

- Richard Hamilton, marketing director, indicted
- One count of conspiracy
- One count of violating the Export Administration Regulations.
- Vincent Delfino, former Operations Mgr., indicted One count of conspiracy
- Six counts of violating the Export Administration Regulations.

**Berkeley Nucleonics Corp.**

##              Case Example 3

-              Case Example 3
-      Omega Engineering Inc.

## Omega, a Connecticut company, was indicted on charges it illegally shipped measurement equipment—with potential nuclear use—to Pakistan through a German subsidiary after the Department of Commerce denied an export license.
Company claimed the shipment to Pakistan was separate from the license application and did not require a license.

- Company claimed the shipment to Pakistan was separate from the license application and did not require a license.

**Omega Engineering Inc.**

## Commerce rejected company’s arguments at each stage of process based on risk of diversion to an unsafeguarded nuclear facility. 
Some of company’s employees tried to alert senior executives of the employees’ concerns about the export.

- Some of company’s employees tried to alert senior executives of the employees’ concerns about the export.

**Omega Engineering Inc.**

## Company’s CFO directed that the equipment be shipped.  
Recently Omega pled to an information charging it with a criminal violation of the IEEPA for exporting commodities to Pakistan through its German subsidiary after being denied an export license to ship directly to the end-user.  
PLC prompted charges.

- Recently Omega pled to an information charging it with a criminal violation of the IEEPA for exporting commodities to Pakistan through its German subsidiary after being denied an export license to ship directly to the end-user.
- PLC prompted charges.

**Omega Engineering Inc.**

##                Case Example 4:

-      Pakistani Businessman
-     Pakland PME Corporation

## Pakistani businessman and South African counterpart were indicted for allegedly conspiring to export controlled triggered spark gaps and high-tech testing equipment to Pakistan, via South Africa, without the required Department of Commerce license.
The triggered spark gaps are high-energy electrical switches with dual-use capabilities.

- The triggered spark gaps are high-energy electrical switches with dual-use capabilities.

**Pakland PME Corporation**

## Pakland PME Corporation

- In the civilian sector, triggered spark gaps (Illustrated in Figure 1) are used in medical equipment to dissolve kidneystones.
- In the military sector, triggered spark gaps are used for:
- Ordnance firing
- Rocket ignitions
- Nuclear detonators

- Figure 1:

## An anonymous source informed agents that a South African company was in the process of obtaining several hundred triggered spark gaps from a New Jersey broker.
South African business partner was arrested at Denver Internat’l Airport.
Simultaneous searches were conducted at the New Jersey broker’s office and South African business.

- South African business partner was arrested at Denver Internat’l Airport.
- Simultaneous searches were conducted at the New Jersey broker’s office and South African business.

**Pakland PME Corporation**

##                Case Example 5:

-      L-3 Communications
-      Exported X-Ray System

## A Virginia Company (L-3 Communications) exported a cargo x-ray unit to the Netherlands without the required Department of Commerce license.
Company agreed to pay $33,000 in civil fines.
Agents were permitted to conduct an audit on eight of its other companies over a one-year time period for export-related transactions.

- Company agreed to pay $33,000 in civil fines.
- Agents were permitted to conduct an audit on eight of its other companies over a one-year time period for export-related transactions.

**L-3 Communications**

##                Case Example 6:

-    Dubai Trader and Iranian
-    Company Officer

## Iranian company officer attempted to use UAE trader to purchase several hundred radiators (valued at more than $80k) for forklifts with the intent to circumvent US export control laws.
UAE trader was arrested in DC and charged with three international violations, including the EAR.  
Each violation carries a maximum of $250k per penalty along with 10 years imprisonment.
Iranian officer was charged with the same violations and an arrest warrant has been issued for his capture.  He is believed to be in Iran.  

- UAE trader was arrested in DC and charged with three international violations, including the EAR.
- Each violation carries a maximum of $250k per penalty along with 10 years imprisonment.
- Iranian officer was charged with the same violations and an arrest warrant has been issued for his capture.  He is believed to be in Iran.

**Dubai Trader and Iranian Company Officer**

## Administrative Penalties

- CIVIL AUTHORITIES
- EAR - TITLE 15, C.F.R. Part 764
- CIVIL SANCTIONS
- Fines:  $11,000/violation
- Denial of Export Privileges / Revocation of Export Licenses
- Exclusion from practice

## Temporary Denial Orders (TDOs)

- Department of Commerce is the only agency authorized to issue TDOs
- Designed to halt imminent violations
- Warns exporters & consignees not to do business with these individuals & firms
- Valid for 180 days and issued on *ex parte* basis
- Renewable

**Notes:**
Notes:
This module explains the workings of the U.S. Export Enforcement organization.

- Permitted under EAR Section 764.5
- Initiated by a company when a company identifies export violations
- Violations still investigated by OEE
- “Great Weight” Mitigating   Factor

## How Do I Avoid This?  Root Causes of Civil Enforcement Cases

- 1.  Incomplete Transaction Information
- 2.  Ignoring Red Flags
- 3.  Human Error
- 4.  Incorrect SED Filing
- 5.  Non-Compliance with License Conditions

## 1.  Incomplete Transaction Information

- Unknown end-user
- Unknown or inconsistent end-use
- Multiple parties to a transaction not listed
- Incorrect product classification
- _Solution:_
- Identify all parties to a transaction, confirm legitimate intermediaries and ultimate consignees.

## 2.  Ignoring Red Flags

- Person placing the order is unfamiliar with product or information regarding end-use
- Inappropriate end-user:  banks, overseas freight forwarders, etc.
- Conflicting information on sales documentation and export routing correspondence.
- _Solution_:
- Ask questions and inquire further if you have concerns.

## 3.  Human Errors

- Pressure to meet sales goals and rush order processing
- New personnel using outdated go-by documentation
- Export manager on vacation - no cross trained back up export managers
- Poor communication with sales staff and foreign distributors
- _Solution_:
- Increase training and cross train personnel.  Ensure export guidelines and classifications are current.

## 4.  Incorrect SED Filing

- Wrong ECCN entered on SED
- Improper use of NLR (_N_o _L_icense _R_equired) exemption
- Incorrect Ultimate Consignee
- _Solution_:
- Seek assistance from BIS and ensure correct classifications.

## 5.  Non-Compliance with License Conditions

- Failure to identify all conditions on issued license
- Failure to identify any conflict of conditions with sales transaction.
- _Solution:_
- Resolve any conflicts before proceeding with transaction.  Even if this means amending the license!
- Notify intermediate and ultimate consignees of the BIS license conditions.
- Submit all reporting as required by BIS license.

- Other Enforcement Priorities

## Deemed Exports

-    A “deemed export" is an export of technology or source code (except encryption source code) that is "deemed" to take place when it is released to a foreign national within the United States. See §734.2(b)(2)(ii) of the Export Administration Regulations (EAR).

## 	Technology is "released" for export when it is available to foreign nationals for:
visual inspection (such as reading technical specifications, plans, blueprints, etc.)
when technology is exchanged orally 
made available by practice or application under the guidance of persons with knowledge of the technology

- visual inspection (such as reading technical specifications, plans, blueprints, etc.)
- when technology is exchanged orally
- made available by practice or application under the guidance of persons with knowledge of the technology

- Deemed Exports

## Export license required under the "deemed export" rule when both conditions are met: 
Intend to transfer controlled technologies to foreign nationals while in the United States; and 
Transfer of the same technology to the foreign national's home country would require an export license.

- Intend to transfer controlled technologies to foreign nationals while in the United States; and
- Transfer of the same technology to the foreign national's home country would require an export license.

- Deemed Exports

## Visa Review Program

- Export Enforcement reviews thousands of H1-B visa applications annually
- In FY 2003, 109 Visa applications of these were referred to OEE’s field offices for further investigation.
- Results:
- Most visas were found to be legitimate
- In some instances, the alleged visa sponsors were completely unaware of the intended visit.
- In some instances, the sponsors were unaware of the deemed export rule.  Resulting investigations led to the prosecution and detention of goods.

## Future Outlook

- Increased Partnership opportunities with Industry
- More agents and more targeted emphasis
- Focused enforcement on key areas

## When You Find a Violation	

- Notify management
- Identify and contain immediate violation
- Conduct internal audit for scope of problem
- Initiate a self-disclosure report to OEE

## Contact BISWE’RE HERE TO HELP!

- If you have questions about product classification, call BIS Exporter Services
- If you have questions about Red Flags or other potential enforcement problems call BIS Office of Export Enforcement (OEE)
- Check the BIS Website for current information about regulations, denied parties and listed entities

## OFFICE OF EXPORT ENFORCEMENTHotline 1-800-424-2980Unit Chief Holland’s 202-482-6450

**For more information or to receive regular email updates, please visit our website at :  **
- _[www.bis.doc.gov](http://www.bis.doc.gov/)_