Failure to Update EAR Costs Firm $3 million

A California firm has agreed to pay over $3 million as part of a settlement agreement for unlicensed shipments of transistors to Russia, the Commerce Department’s Bureau of Industry and Security announced.

The $3.3 million civil penalty against Integra Technologies Incorporated, a radio frequency and microwave power solutions engineering and manufacturing company headquartered in El Segundo, relates to Integra’s shipments to Russia of transistors and related products, which can be used for avionics or radar systems.

Integra made a significant number of shipments to Russia, several of which occurred after such products had been designated by the United States, the European Union, Japan and the United Kingdom as Common High Priority List items. The CHPL items are items that Russia specifically seeks to procure for its defense industrial base to support weapons programs used in its full-scale invasion of Ukraine.

Integra sold approximately $6.67 million of transistors and related products, including CHPL items, to Russian end users between February 2023 and October 2023. All of these sales occurred without the requisite license or other authorization from BIS, according to Commerce.

Integra voluntarily disclosed the conduct to BIS and cooperated with the investigation by BIS’s Office of Export Enforcement. This voluntary self-disclosure resulted in a significant reduction of the penalty.

BIS also agreed to suspend $1.5 million of the penalty due to Integra’s limited ability to pay.

As part of the settlement agreement, Integra admitted to the conduct set forth in a Proposed Charging Letter, which alleged 94 violations of the Export Administration Regulations.

Specifically, on 94 occasions between February 2023 and October 2023, Integra sold and exported transistors and related products via two third-party distributors to eight different Russian end users, without any license or authorization from BIS. The transistors that Integra exported were added to the CHPL in July 2023.

At the time of the violations, Integra was aware that it was shipping transistors and related products to Russian end users. However, because Integra’s export compliance program lacked procedures requiring regular review of revisions to the EAR, Integra failed to recognize that, as of February 2023, such items required a license for export to Russia.

Integra did not realize its error until October 2023, after which Integra promptly stopped all shipments intended for Russian end users and filed a voluntary self-disclosure with BIS.

Integra stated that, at the time of the relevant shipments, it believed the specific EAR99 products it sent to Russian end users were technologically suitable only for civil end use, rather than military end use.

Lindsay Bernsen Wardlaw of Gibson Dunn draws our attention to the circumstances of the violation:

"Note that these items were not licensable before Russia’s invasion, but they became licensable afterwards, as part of the continuously tightening vise the U.S. and allied governments have applied to shipments to Russia.

"According to BIS, “because Integra’s export compliance program lacked procedures requiring regular review of revisions to the EAR, Integra failed to recognize that, as of February 2023, such items required a license for export to Russia.”

"This hits a concern I think every compliance professional has felt in their soul for the last couple of years: That with such frequent updates to U.S. trade laws, it is possible to miss a big change—and then make a big misstep.

"It’s hard enough to fight everyday fires, much less to constantly update the organization’s internal compliance requirements to reflect changing rules, and then socialize those updates.

"This finding should empower trade compliance teams to ask their management for the budget needed to keep up to date with the regulations!"