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.
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Did You Miss It?

The US Department of Commerce (DOC), Bureau of Industry and Security (BIS), finished their annual three-day 2013 Update Conference on Export Controls and Policy in Washington DC today on a high note.  The concluding Roundtable Discussions and the Q&A at many of the Main Conference Sessions were particularly outstanding! 

The theme of Update this year is “Fulfilling the Promise.”  Perhaps a more appropriate title is “Fulfilling the Promise-A Work in Progress.”  Nevertheless, DOC and BIS leadership along with a dedicated conference team did a great job coordinating, executing the event and laying important groundwork for Export Control Reform (ECR) and the migration of thousands of articles from State Department to Commerce Department jurisdiction.

Most of the presentations are already available on the newly designed BIS website at http://www.bis.doc.gov/.  Do yourself and your organization a big favor-- download them, review them and share the information broadly with counterparts.  They include a great deal of excellent, timely and useful ECR related material that will help you and your organization make what could be a very turbulent transition!  

 

Three Raytheon Settlements Provide Insight into Evolving Perspectives on Compliance and Enforcement at the Directorate of Defense Trade Controls (DDTC

If you only read the most recent Raytheon-DDTC settlement documents you do not get a complete picture of their compliance culture, history over the last 15 years, how the State Department used to handle cases and how they approach them now, especially in the area of mandated compliance measures.

If you want some valuable additional insight and telling trend information, check out the one page Raytheon-DDTC Settlements Summary/Comparison at http://www.scribd.com/doc/152123272/Raytheon-DDTC-Settlements-Summary
or http://www.slideshare.net/jpriecko/raytheon-ddtc-settlements-summary-070613.

It provides an interesting side-by-side comparison of the April 2013, February 2003 and October 1999 Raytheon settlements with the DDTC. A few significant differences are worth noting. Is there one thing in particular that seems most obvious?

What do you attribute the differences over time to? What do you think are the most important takeaways when considering all three of the Raytheon-DDTC settlements?

April 30, 2013, Raytheon Settlement Summary - Important Lessons Learned

A concise one-page summary of the April 30, 2013, US Department of State settlement with the Raytheon Company is now available online at: http://www.slideshare.net/jpriecko/raytheon-043013-settlement-summary-060613

or at http://www.scribd.com/doc/151713277/April-2013-Raytheon-Settlement-Summary. 

It is a bite-size tool in a template format summarizing material facts from the Proposed Charging Letter, Consent Agreement and Order.  For more on the lessons learned and key takeaways, read the narrative introductory text on either of the above sites.

Keeping You Informed on Unique West Coast Outreach, Education and Training Opportunities

You are invited to attend two guaranteed, high-quality, cost-effective, hands-on, practical application and case study focused workshops on December 4^th in Los Angeles (LA) and December 6^th in San Diego.  Both programs are hosted by the US Commercial Service and District Export Councils along with other local, state, national and international sponsors and partners.   

With a confirmed second Obama administration and ongoing Export Control Reform it’s even more important than ever before for trade compliance and export control professionals to attend and contribute.  In particular, with the migration of thousands of articles from the US Munitions List to the Commerce Control List these are timely opportunities.  You and your organization need to be represented.

If you haven't already, it’s time to register.  For an LA area agenda, more details and registration go to: http://export.gov/california/losangeleswest/tradeevents/workshop/.  For San Diego go to: http://export.gov/california/sandiego/index.asp

For abbreviated presenter bios go to: http://www.scribd.com/doc/109922667/WORKSHOPS-FOR-EXPORT-COMPLIANCE-PROFESSIONALS-Abbreviated-Presenter-Bios.

If you have questions about the LA area workshops, please contact: Delia Valdivia, 310-235-7203 or delia.valdivia@trade.gov.  For San Diego it’s Julie Osman, 858-467-7037 or julie.osman@trade.gov.

What happened to the United Technologies Corporation (UTC) and many of its subsidiaries?

For a concise one-page overview of the State Department case go to:  http://www.scribd.com/doc/113572181/UTC-Department-of-State-Settlement-Summary.

The summary consolidates material from the US Department of State’s Proposed Charging Letter, Consent Agreement and Order.  It is a much more concise and consistent summary in a format that is particularly useful for C-level executives and trade compliance professional’s education/training at all levels. 

Thoroughly reading settlements including monitoring various US Government enforcement and compliance resources including websites should be an integral part of any trade compliance professional’s reading and an essential element in any comprehensive Trade Compliance Program.

One-page summaries like these help get the word out in a more bite-size way and allow readers to more quickly digest and compare individual cases.

To better appreciate the two 2012 UTC enforcement actions (one criminal and one civil); you must carefully read the entire settlement package on the DDTC website at http://www.pmddtc.state.gov/compliance/consent_agreements/UTC.html.  Details on the DOJ case are included in a Press Release at http://www.justice.gov/opa/pr/2012/June/12-nsd-824.html.

CONSIDER:  What impact and implications are there regarding these cases that apply to you and your organization?

 

If you are not yet up-to-speed on what happened and the lessons learned, it is past time to get clued-in.

In Case You Missed It: Office of Management (OMB) Action Impacts Progress on Export Control Reform (ECR)

The OMB has slowed down publication of Federal Register notices.  This is standard policy at the end of any administration leading up to an election to avoid last minute rulemaking.  Thus, aggressive plans in various ECR related areas including the first transfers of US Munitions List defense articles to the Commerce Control List are in a somewhat fuzzy gray area. 

You have likely already figured this out, but the outcome of the elections can have a profound impact on ECR efforts on many fronts.