Sunrise Technologies and Trading Corporation, a New York based business and its owner Jay Shih pleaded guilty in the District Court of the District of Columbia to conspiracy to export high technology computer equipment to Iran through Dubai, UAE. According to this report by the Department of Commerce’s Bureau of Industry and Security (BIS), Sunrise sent over 400 computer units to Dubai with the intention of reexport to Iran. Notably the purchaser was a company with operations in Dubai and Iran. The parties have settled on a forfeiture of a money judgment for $1.25 million, and have agreed to the loss of export privileges for 10 years, according to the report issued by the BIS. This enforcement action involves a number of players, including the BIS Immigration and Customs Enforcement (ICE), and the Office of Foreign Assets Control (OFAC).
Why you should care
Even if you are not dealing with Iran (or similarly sensitive countries, like Syria) you should always make sure who your end users are. To some extent export-controlled goods require certain end use declarations (such as the BIS Form 711). However, businesses, should take extra care when trading high tech goods.
1. Is what you are exporting controlled by the Export Administration Regulations (EAR)?
The EAR is different from the OFAC regulations. The EAR govern a whole host of dual-use technologies (goods that have both civilian and military application, such as certain airplanes, computer chips, fertilizers). They are not just controlled for Iran and Syria, but even in some cases states friendly to the United States. Don’t forget – the jurisdiction follows the goods.
2. Do you have foreign nationals in your company?
It is especially important all access of export-controlled goods, designs, plans and technologies by certain foreign national employees and contractors in the United States and abroad be authorized. Even if you do not export, having a foreign engineer see the plans can result in a deemed export. In other words, that person seeing the plans or receiving them by e-mail is effectively the same as if you had exported the technology to the individual’s home country. If that needs a license, so does sharing it with the individual, even if in the United States.
3. Do you have a compliance program?
How are you going to prevent violations? It is imperative that companies trading such technologies implement a compliance program. These are not just for large companies, but can be scaled to fit the nature of your business. A solid compliance program can include:
- an internal control system creating a mechanism for the reporting of potential problem transactions to company officers, compliance chiefs, etc.
- a written handbook educating employees on the nature of OFAC, BIS and other violations, what is covered, what isn’t, etc.
- a system to screen counterparties’ names. Remember, even if you are not dealing with companies that are off limits or require licensing, you should make sure the companies you are selling to are legitimate and not going to reexport your technologies to critical jurisdictions.
Much more can be written on this issue and this is just a sample. The key lesson from this example is that compliance with export control laws is critical.