On Monday, November 8, 2021, the Bureau of Industry and Security (BIS) of the US Department of Commerce announced its first enforcement case against a company, Pennsylvania-based SP Industries, Inc. (SP Industries or SP Scientific), for unauthorized exports to Huawei and two of its subsidiaries of EAR99 items in contravention of the Export Administration Regulations (EAR). SP Industries reached an administrative settlement with BIS, resolving the allegations against it by agreeing to pay an $80,000 penalty and submit to audit requirements. Huawei and the two subsidiaries (among other affiliates) had been added to the Entity List in May 2019. Accordingly, exports, reexports, and transfers to Huawei and its listed affiliates (collectively, Huawei) of any items subject to the EAR (including EAR99 items) without a license are restricted.
Before the November 8 announcement, BIS had not announced any enforcement actions or settlements of enforcement actions against companies—US or non-US—for unauthorized exports to Huawei since it added Huawei to the Entity List in 2019. The November 8 announcement, which comes merely thirty months after Huawei's initial addition to the Entity List, reveals that BIS considers Huawei-related enforcement a priority. The BIS press release includes a pronouncement that "Huawei continues to present a threat to U.S. national security and foreign policy interests, and BIS . . . will aggressively investigate export violations where Huawei or any of its subsidiaries on the Entity List are a party to an export transaction[.]"
BIS's stance on Huawei-related enforcement does not preclude leniency for entities that cooperate fully with BIS on an investigation. SP Industries fully cooperated with BIS's investigation, including voluntarily self-disclosing two of the alleged violations. And, since learning of the alleged violations, SP Industries established new export screening and compliance procedures for all orders of its products to remedy the "errors in its export screening process" that resulted in the alleged violations. The SP Industries enforcement case highlights the importance of establishing robust risk-based export compliance programs.
*Dana Or contributed to this Advisory. Ms. Or is a graduate of the Harvard Law School and is employed at Arnold & Porter's Washington, DC office. Ms. Or is admitted only in California. She is not admitted to the practice of law in Washington, DC.
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