Case Study: What does it mean to become a Denied Person? AW-Tronics' US Export Control Violations


On January 24th, 2020, the US Federal Register published a case whereby the US Bureau of Industry and Security of the U.S. Department of Commerce (“BIS”), had issued of a Charging Letter alleging AW-Tronics and Arrowtronic and other individuals (A&A) to attempts to evade the prohibitions and licensing requirements of the Export Control Regulations and avoid detection by U.S. law enforcement.


Unlawful export to Syria

In 2013 and 2014 the company and others involved conspired and acted in concert with others, known and unknown, to export goods from the US through transshipment points to Syria, including to Syrian Arab Airlines (“Syrian Air”), the flag carrier airline of Syria and a Specially Designated Global Terrorist (“SDGT”).


What does the law say?

A license is required for the export or reexport to Syria of all items subject to the EAR Regulations (except food and medicine classified as EAR99).


A license is required to export or reexport items subject to the Regulations to SDGTs.


Syrian Air was designated as an SDGT on May 16, 2013.


How did the cover-up and the conspiracy occur?

  • E-mail communication between the US, Bulgaria, United Arab Emirates (UAE), and Syria. This included instructions that were designed to prevent U.S. law enforcement from detecting the unlawful exports to Syria and to allow them to continue by changing the routing of exports from A&A's Miami, Florida office.

  • Under their scheme, co-conspirators would purchase from U.S. suppliers or vendors items subject to the EAR for export to Syrian Air in Syria, including aircraft parts and equipment, and would provide materially false or misleading documents and information to conceal the illegal exports.

  • In furtherance of the conspiracy, they also would arrange for payment for the illegal exports to be made using third-party companies to transfer payments between the co-conspirators.

  • A&A engaged in multiple transactions with Syrian Air involving the export of aircraft parts and equipment subject to the EAR Regulations from their Miami office of A&A to Syrian Air's transshipment point in Dubai, UAE.

  • These items were actually intended for, and some or all were ultimately delivered to, Syrian Air in Syria.

How was the illegal activity first detected?

  • In March 2014, United States Customs and Border Protection (CBP) seized a shipment of micro switches that, according to Electronic Export Information (EEI) filed in the Automated Export System, was destined for Syrian Air in the UAE, when, in fact, the ultimate destination was Syria.


What was their reaction?

  • On March 5, 2014, Marjan Caby sent an email to AW-Tronics/Arrowtronic logistics employees, copying Alex Caby, that explained, “We will . . . have packages stopped by the US Customs and Border Control [and] have a case file like this for the same client[,]” and provided instructions stating: “NOTHING WILL BE SHIPPED TO CLIENTS IN THE MIDDLE EAST FROM THE USA OFFICE. WE HAVE TO SEND TO BG [Bulgaria] THEN TO CLIENT.” (Emphasis in original).

  • “SYRIA” was specifically listed as one country for which Respondents would use Bulgaria as a transshipment point.

Consequences - A Denied Person


A Settlement Agreement has been reached with one individual, who is designated a Denied Person. Other charges or actions are not disclosed in this case.


A Denied Person cannot export controlled goods

As a Denied person, that one individual may not, directly or indirectly, participate in any way in any transaction involving any commodity, software or technology (hereinafter collectively referred to as “item”) exported to or to be exported from the United States that is subject to the Regulations, or in any other activity subject to the Regulations, including, but not limited to:

  • Applying for, obtaining, or using any license, license exception, or export control document

  • Carrying on negotiations concerning, or ordering, buying, receiving, using, selling, delivering, storing, disposing of, forwarding, transporting, financing, or otherwise servicing in any way, any transaction involving any item exported or to be exported from the US that is subject to the EAR, or engaging in any other activity subject to the Regulations; or

  • Benefitting in any way from any transaction involving any item exported or to be exported from the United States that is subject to the Regulations, or from any other activity subject to the Regulations.

Nobody can export to or facilitate the export to a Denied Person

  • Export or reexport to or on behalf of the Denied Person any item subject to the Regulations;

  • Take any action that facilitates the acquisition or attempted acquisition by the Denied Person of the ownership, possession, or control of any item subject to the EAR Regulations that has been or will be exported from the US, including financing or other support activities related to a transaction whereby the Denied Person acquires or attempts to acquire such ownership, possession or control;

  • Take any action to acquire from or to facilitate the acquisition or attempted acquisition from the Denied Person of any item subject to the EAR Regulations that has been exported from the US;

  • Obtain from the Denied Person in the US any item subject to the EAR Regulations with knowledge or reason to know that the item will be, or is intended to be, exported from the US;

  • Engage in any transaction to service any item subject to the EAR Regulations that has been or will be exported from the United States and which is owned, possessed or controlled by the Denied Person, or service any item, of whatever origin, that is owned, possessed or controlled by the Denied Person if such service involves the use of any item subject to the EAR Regulations that has been or will be exported from the US. Servicing means installation, maintenance, repair, modification or testing.

Licenses for the Denied Person are revoked

Any licenses issued under the EAR Regulations are revoked by BIS.


These rules apply not only to the Denied Person but others

Any person, firm, corporation, or business organization related to the Denied Person by affiliation, ownership, control, or position of responsibility in the conduct of a trade or related services also be made subject to the provisions of the Order.


No public statement, please

The Denied Person cannot take any action or make or permit to be made any public statement, directly or indirectly, denying the allegations in the Charging Letter or the Order.


We go Public - Name & Shame

The Charging Letter, the Settlement Agreement, and the Order are made available to the public.


Takeaways

  • Export Control Violation have severe consequences and can impact individuals as well as companies

  • Being added to a Denied PArty list results in the loss of export privileges and is subject, at the very least, public naming in the Federal Register.

  • Customs Managers, Global Trade Professional, and Companies involved in exporting need to do their utmost to ensure their Denied Party and other lists are up-to-date.

  • Professional Legislative Monitoring, continuous educations & training and professional support can assist in ensuring no new entry to restricted party screening lists gets missed and action can be taken to prevent export control violations.

Interested in daily Professional legislative Monitoring? Get in touch

Interested in Learning about Export Controls? Get in touch


Source

https://www.federalregister.gov/documents/2020/01/24/2020-01177/order-relating-to-marjan-caby