US Export Enforcement Focus Includes Zeroing in on Russia
SANTA CLARA, Calif. -- The Bureau of Industry and Security is turning up its enforcement focus on illicit shipments to Russia and Ukraine after the U.S. issued several sanctions against Moscow in December, Joseph Whitehead, special agent in charge of the BIS San Jose Field Office, said during the Annual Export Control Forum. The U.S. ordered sanctions in response to alleged interference in U.S. election processes and alleged harassment of U.S. personnel in Russia (see 1612300010). “From an investing in special agents standpoint, we are thirsting for Russian cases right now,” Whitehead said. “So we do look for those, and go after them.” There has been an uptick in export violations vis-a-vis Russia since the executive branch first ratcheted up sanctions against the country in 2014 following its invasion of Crimea, he said.
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Whitehead told conference attendees that if they are unsure about whether the intended recipient of a Commerce Control List-designated good is a permitted end-user, BIS can help research for verification purposes. “If you’ve gone as far as you can on learning, but you’re still not sure or not confident, you can call us and I can at least dig and see if there’s any information not available to you on that end-user that might change things,” he said. “We can dig a little deeper for you if you’re not sure about that.” Whitehead also touched on what BIS is looking for as far as freight forwarder liability in illicit export actions is concerned, noting that forwarders should be “experts” on checking names and addresses to make sure items aren’t headed toward prohibited destinations. “For the most part, [for] the items that you’re sending, it’s more the company’s responsibility to have the classification,” he said. “We can’t expect you to be technical experts on everything you get.”
Whitehead told a story about an instance in which DHL was making prohibited shipments to Syria shortly after Congress passed an embargo on the country in 2003. The company’s automated flagging program was only programmed to capture shipments headed to Cuba and North Korea, and the company kept shipping to Syria. The company aimed to stop shipments to Syria by printing out a notice for employees and posting it on the break room door, Whitehead said. “That’s a freight forwarder who knows it all,” he said. “They were so big, they didn’t have visibility into what was happening at the low level. But they weren’t doing the basic checks of prohibited destinations for shipping.” DHL incurred a $9 million fine in connection with the action and other mistakes, Whitehead said.
Whitehead said he sees numerous export violations among package forwarding servicers, which are prominently used, adding that they usually aren’t trained in export compliance and often don’t understand what they’re repackaging. “I would venture a guess -- show me a package forwarding service, and I will show you a place where there’s an export violation,” he said. “There’s no way that they can get that all right, because at some point, someone’s going to order something that needs an export license and no one’s going to ask any questions.”
Whitehead told a story of an overseas customer who ordered goods online, and asked the Florida-based seller to omit the invoice from the shipping box. The Florida-based seller “smelled a rat” and informed BIS. The case led FBI and Department of Homeland Security agents to a packaging servicer in Gresham, Oregon, which was facilitating these types of prohibited shipments, Whitehead said. BIS fined the Oregon company $250,000, suspending $190,000 of that. “So they really only had to pay $60,000. The reason we do that is we look at what the company can actually pay. Do we want to put the company out of business, or do we want to facilitate them to continue working in a better way?” he said. “The suspended amount means, for a period of time, if they make another violation, we can easily just charge that amount. It’s kind of like hanging over their head to give them incentive to get it right.”
On the State Department side, Dan Cook, chief of Compliance, Registration and Enforcement in State’s Office of Defense Trade Controls Compliance (DTCC), said he sees more violations in registration and maintenance than other areas, largely because people renew their registrations late or they don’t update necessary proprietary information before their annual renewals. Cook’s division sometimes notices restructurings when companies latently list them on these renewals, he said. “If you brought in a new subsidiary that’s doing ITAR [compliance], that’s not something you wait until you renew to let us know about,” he said. “If you divested some companies from another U.S. entity, within five days of that event, you’re supposed to tell us.”
Also speaking during the forum, DTCC compliance specialist Marissa Cloutier acknowledged that different units at State sometimes send different guidance to traders, and said State will work to address the issue. “That’s not what we would like to be sending out to the public,” she said. “So if you have encountered other instances in which we were sending out different compliance guidelines, please let us know. We’d like to take that down and make sure it is comprehensive and we’re sending out one message to industry.”