Two cases in which companies were fined for export violations show how exporters are being held accountable for complying with regulations of export licenses.
Last December the Commerce Department's Bureau of Export Administration imposed a $10,000 civil penalty on Lafayette Instrument Co., Inc. The BXA charged that the Indiana-based company violated the terms of its export license when the polygraph machines it had sold to a Hong Kong firm were re-exported to the People's Republic of China without authorization.
The BXA said Lafayette held a validated export license that authorized the company to export Factfinder polygraph machines to Hong Kong but prohibited their resale, transfer or re-export without prior authorization from the Commerce Department. The polygraph mach-ines are subject to national-security controls. During one of many periodic visits that BXA agents make to foreign countries to make sure that controlled goods go to the designated consignees, agents noticed that the polygraph machines were in fact in China.
Amanda DeBusk, assistant commerce secretary for export enforcement, said the lesson of the Lafayette case is that you must know the terms and conditions of your export license and comply with them. Lafayette not only allowed the goods to be re-exported, but allowed them to be re-exported to China, DeBusk said. ''The terms and conditions are on there for a reason,'' she said. ''The export community needs to take them seriously. You can't just say you got a license and that's the end of it.''
Roger Majak, assistant secretary for export administration with the Bureau of Export Administration, said there are at least 30 terms and conditions that might be attached to an export license. The BXA has been using terms and conditions in the licensing process more often, Majak said. During the Cold War, it was common for companies to receive outright denials from the BXA for their export requests. The issue of conditions rarely arose.
Now, in the context of a liberalized global trading regime, with the BXA approving exports more often, there are numerous situations in which limited constraints must be placed on an export transaction even though it is fundamentally allowable, Majak said.
''There are terms and conditions attached to more than 80 percent of the licenses that we issue,'' he said. ''Conditions are a part of the process.''
The license condition that Lafayette violated was a standard one, Majak said. Most export licenses are issued with the condition that there can be no re-export without authorization. In general, he said, terms and conditions that are attached to export licenses are fairly transparent and have been prearranged with the exporter.
''If a condition is at all unique or special, most of the time we work it out with the exporter,'' Majak said. ''We tell the company what we intend to put on there because we don't want to waste their time or ours on conditions that they can't comply with.''
Some terms and conditions are specific to certain types of products. For example, semiconductor manufacturing equipment might require an export license with the condition that operating software can't be changed unless the exporter requests a separate license. The reason, Majak said, is that the goods can be used for a wide range of activities, depending on the software that is installed.
''The license might specify that only certain types of software can be used, or if there are any changes they have to come back and ask for a separate license,'' Majak said.
Another case with implications for exporters is that of Immunostics Inc., an Ocean, N.J., manufacturer and distributor of medical testing equipment. Last September the company pleaded guilty to providing fraudulent export documents to the Commerce Department and Customs Service. According to court documents, the company submitted a shipper's export declaration that knowingly understated the price that it had charged its foreign customer for goods. The company was fined $60,000.
Undervaluing goods for export is a fairly common practice, according to several export consultants, because it because it can result in lower duties and taxes.
Majak said that undervaluing goods for export is not necessarily a licensing issue but it could very well be. The BXA has ''de minimus'' rules, which dictate that licenses are required for certain items if those items have a certain commercial value. Undervaluing the items could throw them into a category in which they do not require a license, even though, at their true value, they do.
There are other trade reasons an exporter might make false statements on an SED, said Majak. An exporter might misstate technical specifications of equipment in order to exaggerate its capability, or may list an intermediary who has no real role in the transaction. If detected, those exporters will be fined, Majak said. ''If any of the information that we ask for in a license application is misrepresented it could be a license violation,'' he said, ''even if it is not done for that purpose.''