The US Bureau of Industry and Security (“BIS”) recently announced a $125,000 settlement reached with Aramex Emirates,an Emirati freight forwarder, for facilitating the export and re-export of computer monitoring products to Syria in violation of the US export laws. BIS already reached a $2.8 million settlement BIS reached with Computerlinks FZCO last year for the same exports. This without either company being located in the United States, having property or operations inside the United States or being owned or operated by United States citizens. BIS alleges that the two foreign companies exported and re-exported network devices and software to Syria that would allow “the Syrian government to monitor internet activity and block pro-democracy websites as part of its brutal crackdown against the Syrian people.” According to BIS, Computerlinks FZCO told US manufacturer Blue Coat that the items at issue were destined for the Iraq Ministry of Telecom and an Afghan internet service provider (Liwalnet). In reality, Computerlinks knew that the items were destined for end users in Syria. Aramex Emirates employees had previously been advised of US sanctions against Syria in a company-wide flyer, but facilitated the exports anyway.
How can the United States impose such fines on foreign companies with no direct contacts inside the United States?
The United States has determined that the two main export laws guiding exports of both defense articles and commercial and dual use items apply extraterritorially. In other words, they apply to US citizens, lawful permanent residents and asylum seekers, wherever in the world they may be AND to US items and technology, wherever those items may end up. So if a US item, such as the software described above, is sold to a foreign company, that foreign company is still responsible for following all the US export laws with respect to where that item eventually ends up.
Why would a foreign company agree to pay a US fine?
You may be wondering why Aramex and Computerlinks FZCO, with no American ties, would agree to pay a fine imposed by a foreign government like the United States. A foreign company convicted of a US export violation (even in absentia) would likely be placed on a list of entities with which US companies and individuals are prohibited from doing business—the international trade equivalent of a “no fly” list. For a foreign company doing business globally, this would be disastrous.
Why should you care?
This case underscores the fact that your foreign affiliates and trading partners need to be cognizant of US Export laws if they are dealing at all with US products or US technology. What can you do to stay compliant? Conduct regular US Export compliance audits to see if you are compliant and put a robust compliance plan in place. If you discover a violation, be sure to engage expert counsel immediately and discuss with counsel whether to disclose the violation and cooperate with US authorities. The difference between the $125,000 settlement with Aramex and the $2.8 million settlement with Computerlinks was partly due to the fact that Aramex fully cooperated with US investigators.
Should you have questions about your company’s compliance with the US Export laws, please contact Parker Poe’s export counsel.