The DDTC-Aeroflex Inc. Settlement - Deja Vue All Over Again…

First, if you are a trade compliance professional, you need to read the complete Proposed Charging Letter (PCL), Consent Agreement and Order in this case to thoroughly appreciate what happened and the lessons learned.

Central to this settlement is the systemic and long standing nature of the violations based on improper jurisdiction and classification.  Does that sound familiar in light of previous DDTC settlements?

Essentially the Respondent did not know what they were doing.

As the PCL states:  “In making proper jurisdiction and classification determinations the DDTC Commodity Jurisdiction procedure is the only US Government method of determining whether an article or service is covered by the USML. Note the word “only.” 

Further, “Respondent and subsidiaries failed to understand the Department of Commerce can only classify items subject to the Export Administration Regulations.”  Note the words “only” and  “failed to understand.”  Additionally, “A Department of Commerce commodity classification is not a jurisdictional determination for purposes of the Arms Export Control Act.”  Note the word “not.”  Well Dah!

The question is how many more organizations have made, are making and/or will make similar mistakes and like Aeroflex learn the lessons the hard way? 

BOTTOM LINE:  Making correct jurisdiction and classification decisions are critical to avoid export violations and lots of adverse visibility.  They are also fundamental to any sound export compliance program.  In the context of evolving Export Control Reform, experience, knowledge and skills in this area are even more important.

If you get it wrong or got it wrong, there is significant exposure, liability and risk.  In the current invigorated enforcement environment, education and training here are critical!  If you blow it, you and your organization could face and suffer a wide range of negative consequences, just like Aeroflex, and others before them have done.

All the DDTC-Aeroflex settlement documents are available at http://www.pmddtc.state.gov/compliance/consent_agreements/Aeroflex.htm.
.