In a recent case that underscores the critical importance of export compliance, First Call International Inc. has reached a settlement agreement with the Bureau of Industry and Security (BIS) of the U.S. Department of Commerce. This case offers valuable insights for companies engaged in international trade, particularly those dealing with controlled items, and highlights the severe consequences of attempting to circumvent regulations.
The Allegations
BIS alleged that First Call committed three violations of the Export Administration Regulations (EAR):
1. Misrepresentation or Concealment of Facts
2. Two counts of Engaging in Prohibited Conduct
These charges stemmed from incidents involving the export of military aircraft parts and components without proper authorization. However, what makes this case particularly noteworthy is the allegation of backdating a crucial document.
The Backdated Document Incident
One of the most serious allegations in this case involves a Prior Consignee Statement (PCS). According to the charging letter:
1. First Call exported Secondary Flight Displays (SFDs) to the United Kingdom in March 2018 without the required PCS.
2. In September 2018, First Call amended its Electronic Export Information (EEI) filing, falsely claiming the export was made under License Exception Strategic Trade Authorization (STA).
3. When asked to provide the PCS, First Call submitted a document dated January 1, 2018.
4. First Call later admitted that they had advised their UK partner to backdate the PCS to January 1, 2018, which was then sent to First Call on October 8, 2018.
This attempt to conceal the lack of proper documentation by backdating a critical export control document is a severe violation. It not only breaches export regulations but also undermines the integrity of the export control system.
Settlement Terms
The settlement includes several key components:
1. Civil Penalty: A total of $439,992, with $75,000 to be paid in two installments and the remaining $364,992 suspended for one year.
2. Compliance Training: First Call must conduct export control compliance training for relevant personnel and management.
3. Probationary Period: A one-year period during which First Call must comply with all terms of the agreement and avoid further violations.
4. Certification: First Call must submit a certification of completed training to the Office of Export Enforcement.
Lessons for Exporters
This case highlights several crucial points for companies involved in exporting:
1. Document Integrity: Never backdate or falsify export control documents. The consequences of such actions can be severe and long-lasting.
2. Accurate Documentation: Ensure all export documentation is accurate, complete, and obtained in the correct sequence. Misrepresentation, even if initially unintentional, can lead to serious consequences.
3. License Requirements: Thoroughly understand and comply with all licensing requirements for your products, especially when dealing with controlled items like military components.
4. Compliance Training: Regular, comprehensive export compliance training is essential for all relevant staff. This should cover not just the regulations, but also the ethical implications of export control.
5. Due Diligence: Thoroughly vet all transactions, including end-users and intended use of exported items. Don’t assume that intermediary destinations are the final destination.
6. Internal Audits: Regularly audit your export processes to catch and correct any issues before they become violations.
7. Cooperation: If violations occur, cooperating with authorities can lead to more favorable settlement terms. However, this cooperation must be honest and complete.
The Broader Implications
Export compliance is not just about following rules—it’s about national security and maintaining the integrity of international trade. As this case shows, the costs of non-compliance can be significant, both financially and reputationally.
The suspended portion of the civil penalty in this case serves as both a carrot and a stick. It incentivizes ongoing compliance while holding the threat of further penalties over the company’s head. This approach by BIS demonstrates their commitment to improving export compliance rather than merely punishing violations.
Moving Forward
Companies engaged in exporting should view this case as a wake-up call to review and strengthen their export compliance programs. This includes not just updating policies and procedures, but also fostering a culture of compliance where employees understand the importance of their role in maintaining export control integrity.
Remember, an ounce of prevention is worth a pound of cure when it comes to export controls. Investing in robust compliance measures, including thorough training and meticulous record-keeping, can save your company from costly penalties and reputational damage in the long run.
In today’s complex global trade environment, export compliance is not just a legal requirement—it’s a business imperative. Let the First Call International case serve as a reminder of the high stakes involved in international trade and the absolute necessity of unwavering commitment to export control regulations.
