The Latest BIS Technology Export Violation

A couple of years ago, we first awarded The Dummies as a prize to commemorate “the most embarrassing export control penalty of the year.” Even though it’s only July, I think we may already have a “winner” for 2022.

Unlicensed Controlled Technology Exports . . .

As explained by the Bureau of Industry and Security, “three U.S.-based companies, Quicksilver Manufacturing Inc., Rapid Cut LLC, and U.S. Prototype Inc.” engaged in “the unauthorized export to China of technical drawings and blueprints used to 3-D print satellite, rocket, and defense-related prototypes.” Such technology is controlled to China for national security reasons, but – surprise – the required export licenses were not obtained.?

Quicksilver and Rapid Cut entered into agreements to manufacture parts and components for controlled end-items, such as a rocket system’s ground support system. Its U.S. customers provided controlled technology to manufacture those items. Each agreement included export compliance clauses flagging the controlled status of the customer’s information. Nevertheless, Quicksilver and Rapid Cut sent the technology to China for use in manufacturing the parts.

Customers learned of this problem when the parts were delivered to them, accompanied by shipping documents indicating manufacture in China.

. . . Lead to a Temporary Denial Order

Not surprisingly, BIS considered Quicksilver and Rapid Cut’s “clear disregard for export controls” to be so egregious that it imposed a Temporary Denial Order on the companies. The TDO was also applied to U.S. Prototype, due to its close relationship with the other two.?

In issuing the TDO, BIS asserted that “a violation of the Regulations by the above-captioned parties is imminent in degree of likelihood. As such, a TDO is needed to give notice to persons and companies in the United States and abroad that they should cease dealing with Quicksilver, Rapid Cut, and US Prototype in export or reexport transactions involving items, including technology or software, subject to the EAR.”

Winner Winner, Chicken Dinner

Three things make this case stand out from the run-of-the-mill export violation. First, Quicksilver and Rapid Cut were advised in writing that their customers’ technology was export controlled. Their exporting the technology in spite of that warning convinced BIS they were likely to do so again.?

Imposition of the TDO was the second unusual feature. BIS saw a need to bar Quicksilver and Rapid Cut from export trade altogether; the more common sanction, penalties, apparently was insufficient to deter future behavior.

Third, the shipping documents showing the products were made in China were just a dead giveaway to the customers that their controlled technology had been exported. I mean, c’mon . . .?

The lesson is, I hope, obvious. When information is flagged as export-controlled, the recipient should make sure it knows what that means, and what the attendant requirements are.?

Thompson & Associates, PLLC provides representation in all aspects of customs laws and regulations, specializing in export and import regulations and international business counseling. We can be reached at 202-772-2039 or?online.