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Voluntary Disclosures of Export Violations

By Robert Clifton Burns
January 31, 2007

The recent settlement agreement entered in the EP MedSystems matter (described below) does little to refute the common wisdom that the Department of Commerce's Bureau of Industry and Security ('BIS') treats voluntary disclosures of export violations more harshly than other agencies that regulate exports from the United States. It also illustrates a potential, but avoidable, peril in the two-step voluntary disclosure process urged by BIS and other federal agencies. Finally, it serves as yet another example of the regulatory minefield that U.S. export laws present for U.S. companies with foreign subsidiaries.

Unlicensed Shipments to Iraq

At issue are six shipments of seven items of heart monitor equipment valued at $510,590. The equipment was shipped by EP MedSystems from its subsidiaries and/or distributors in Germany, the Netherlands and the United Kingdom to Iran between March 2001 and April 2004 without a license. Shipments of these devices to Iran after July 26, 2001 would have been permissible, notwithstanding the U.S. sanctions on Iran, under the Trade Sanctions Reform Act of 2000 provided that a license had been obtained. Five of the six shipments in question occurred after that date and without a license. The company agreed to settle the charges by BIS for payment of a fine of $244,000. (As will be more fully described below, BIS was not the only federal agency investigating these shipments!)

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