Freight Forwarder’s Entity List Violation: $70,000 Civil Penalty
September 2009

The Bureau of Industry and Security (BIS) has issued a civil penalty against a New York freight forwarder for aiding and abetting an export-related violation involving a party on the Entity List.

According to the terms of the settlement, the company will pay a $70,000 civil penalty for 3 alleged violations occurring in 2006.  The forwarder allegedly arranged for the export of scrap metal to a company in Karachi, Pakistan that is on the Entity List. The total value of the shipments was less than $100,000.  The scrap metal was classified as EAR99.  The Entity List set out the applicable license review policy for the consignee to be a “presumption of approval for EAR99 items.”  However, it appears that the shipments were exported without an export license.  The aiding and abetting penalty is based on strict liability, so intent is not a requirement that BIS must show.

The Entity List was created in 1997 and is modified by BIS from time to time.  The Entity List includes research institutions, governmental agencies, private companies, and other parties whose activities are contrary to U.S. national security or foreign policy interests.  Many entities are involved in activities related to nuclear research, development, and proliferation.  The entities are located in countries ranging from Canada, Germany, Ireland, Israel, Hong Kong, and the UK to China, India, Iran, Malaysia, Russia, Syria, and the UAE. 

The case is notable because it applied the increased penalty level under the International Emergency Powers Enhancement Act of 2007, with maximum penalties of $250,000 per violation (or twice the transaction value), even though the violations occurred prior to enactment of the enhanced penalties. 

This case also shows how BIS continues to actively pursue enforcement of the Export Administration Regulations (EAR) against all parties involved in transactions that violate the export control laws and regulations, including freight forwarders, clearly demonstrating the need for all parties involved with exports to understand and comply with those laws and regulations.

For questions and assistance regarding export controls compliance, penalties, investigations, and self-disclosures, please contact Jon P. Yormick, Managing Attorney, at jon@yormicklaw.com or toll free in Canada and the U.S. at +1.866.967.6425.