The U.S. Department of State and the California-based company Keysight Technologies Inc. have reached a settlement of $6.6 million for violations of the Arms Export Control Act (AECA), 22 U.S.C. § 2751 et seq., and the International Traffic in Arms Regulations (ITAR), 22 C.F.R. Parts 120-130. This settlement comes after a compliance review by the Office of Defense Trade Controls Compliance (DDTC) in the Department’s Bureau of Political-Military Affairs for exporting unauthorized software used for testing radar equipment (on fixed or mobile platforms) to countries including Russia and China.
The DDTC first flagged Keysight’s misclassification and advised Keysight to obtain a proper classification for its software, which later led to the discovery of the violation. The case focuses on the company’s exports from December 2015 to April 2018, in which the software was exported in 24 instances to 17 countries. The software is known as multiemitter scenario generation. By not receiving proper authorization from the federal government, Keysight violated both the AECA and the ITAR.
According to the State Department, Keysight cooperated in the investigation by submitting a voluntary disclosure that acknowledged the charged conduct, implemented remedial compliance measures, and signed a statute of limitations agreement tolling the statutory period. As a result, the Department decided that it would not be appropriate to administratively debar Keysight at this time.
The Department stated that, “The settlement demonstrates the department’s role in strengthening U.S. industry by protecting technical data from unauthorized exports.” It also stated that, “The settlement also highlights the importance of obtaining appropriate authorization from the department for exporting software as well as determining proper export jurisdiction.”
Per the agreement, the Department agreed to suspend $2.5 million of the penalty for Keysight to implement compliance measures; specifically, the company must hire a special compliance officer for two years and conduct an external audit to ensure new safeguards are in place.
Background on Arms Export Control Act (AECA) and International Traffic in Arms Regulation (ITAR)
Export controls are regulated by several federal regulations that are designed to further national security, the economic intertest of the United States, and foreign policy. The Arms Export Control Act (AECA) gives the President of the United States the authority and provides the general rules for the conduct of foreign military sales and commercial sales of defense articles, defense services, and training. The International Traffic in Arms Regulations (ITAR) regulations govern whether defense or military-related technologies may be exported or transferred to non-U.S. citizens. The purpose is to safeguard U.S. national security interest by ensuring that critical technology does not fall into the wrong hands.
Violations of the AECA and ITAR carry hefty civil and criminal penalties. Exporters can pay hundreds of thousands of dollars to millions in penalties, lose export privileges, and even be imprisoned.
Join Our Export 201 Webinar
Do you know if your company is meeting export regulations and obligations? Obtaining counsel who is an expert in export compliance is the first step. Are your employees/staff trained in all exporting issues? Our one-hour webinar is a must attend to help provide you with a foundation of tools and key elements that must be included in your export compliance program. Register today to hear from the following experts:
- President and Founder of Diaz Trade Law, Jennifer (Jen) Diaz is a Chambers ranked, Board Certified International Attorney specializing in customs and international trade; and
- Associate Attorney of Diaz Trade Law, Sharath Patil, assists U.S. manufacturers, distributors, and importers with a range of export compliance and enforcement matters pertaining to the U.S. Department of Commerce; the U.S. Treasury Department; the U.S. State Department; and more.
This Webinar will discuss the benefits an export compliance program, how to reinforce senior management commitment to compliance with U.S. export laws, policies and specific step-by-step procedures that should be integrated and provide personnel with tools to help ensure they are performing their export control obligations.
In this webinar you will learn:
- The Establishment of a Written Compliance Program
- Management Commitment
- Continuous Risk Assessment of Export Program
- Ongoing Compliance Training and Awareness
- Compliance Monitoring and Periodic Audits
- Internal Program for Handling Compliance Problems
Who Should Attend:
- Customs Brokers
- Regulatory Affair Professionals
- In-House Legal Counsel
- Project Development Managers
- Others Interested in Exporting
This webinar is eligible for continuing education credit from the NCBFAA Educational Institute. Space is limited, registration required! Access instructions will be provided after your registration is complete. Don’t just take our word for how awesome Diaz Trade Law webinars are. Click here to see what our past attendees had to say. Be sure to join us on September 22, 2021! To register, click here.
What You Can Do
To stay compliant with AECA and ITAR, the U.S. State Department’s Directorate of Defense Trade Controls (DDTC) strongly encourages registered exporters, manufacturers, brokers, and others engaged in defense trade to maintain a compliance program to assist in monitoring and controlling exports. At Diaz Trade Law, we provide the following services:
- Developing an Effective Export Compliance Program – The development of an effective export compliance plan ensures that your organization remains vigilant and your staff knows the standard procedures to follow to prevent and identify violations. An export compliance plan will help your organization avoid hefty civil and criminal penalties. Diaz Trade Law has significant experience in developing and enhancing export compliance plans for organizations. Additionally, Diaz Trade Law can assist your business in auditing and improving your current plan so that it is in its best shape.
- Conduct Export Compliance Training – The key to an effective export compliance program is compliance training. Training is important because it (1) ensures that all employees understand the export regulations and reinforces internal policies; (2) demonstrates to federal government agencies that your business is proactive about export compliance, and (3) avoids your business from being subject to costly penalties and even criminal liability. Fortunately, export compliance training can be highly tailored to meet your company’s needs. All of your training events include assessments for comprehension, certificates for successful participation, and ample opportunities for Q&A. For your next export compliance training event, trust Diaz Trade Law to provide highly-effective, engaging training.
- Export Transaction Vetting – Unsure whether a proposed export transaction violates the ITAR? Diaz Trade Law has significant experience vetting your potential transaction against U.S. export control laws. Through research and due diligence, Diaz Trade Law ensures that your transaction won’t get you in trouble later down the road.
- Voluntary Self-Disclosures – If your business believes it may have violated the ITAR, it can be in your business’ strategic interest to submit a voluntary self-disclosure (VSD). According to the Directorate of Defense Trade Controls (DDTC), ITAR violations should be disclosed promptly and VSDs can be a significant mitigating factor in DDTC’s analysis of such violations and is strongly recommended. DDTC encourages the submission of VSDs for common violations such as exporting without authorization, unauthorized access to technical data, failure to comply with license provisos, failure to maintain required records, failure to register or maintain registration, or misuse of the ITAR exemptions. Diaz Trade Law has significant experience filing VSDs and mitigating penalties.
- Requesting Authorization / Submitting License or Agreement Applications – Generally, any person or company who intends to export or to temporarily import a defense article, defense service, or technical data must obtain prior approval from DDTC. A license is required when a U.S. company seeks authorization for the permanent export, temporary export, or temporary import of a defense article, defense service, or technical data. Meanwhile, an agreement is generally required when a U.S. person provides a defense service to a foreign person, a U.S. person requires authorization to manufacture defense articles abroad, or a U.S. person seeks to establish a distribution point abroad for defense articles of U.S. origin for subsequent distribution to foreign persons. Diaz Trade Law has significant experience requesting authorization from DDTC on behalf of clients in the form of license applications and agreement requests.
- Mitigation and corrective action – If your business has violated U.S. export control laws, there is a lot you can do to mitigate penalties and prevent future violations. Diaz Trade Law has significant experience representing businesses in dealing with the U.S. State Department’s Directorate of Defense Trade Controls. Specifically, Diaz Trade Law has successfully assisted clients in (1) submitting voluntary self-disclosures to mitigate penalties, (2) negotiated agreements with DDTC, and (3) built corrective action systems to help ensure that your business does not make the same violation again.
If you have questions about export compliance, reach out to us at firstname.lastname@example.org or call us at 305-456-3830.