William Dalton, a resident of New Smyrna, Florida, recently agreed to pay a $25,000 fine in connection with misrepresentations he allegedly made to the Bureau of Industry and Security (“BIS”) in connections with efforts to obtain an export classification number for an underwater tracking system. Only $10,000 is immediately payable, with the remainder suspended on the condition that for a period of one year he commits no further export violations.

According to the charging documents, Dalton told BIS licensing officers that the underwater tracking system, which he was seeking to export to China, was a commercial system and that it had not been designed to meet any military specifications. In fact, the charging documents allege, the system was specifically designed to meet specifications provided by the Chinese Navy. There is no indication in the documents that the system was ever in fact exported to China and the fact that the fine was so low seems to suggest this it was not. On the other hand, it’s not clear how BIS became aware of the misrepresentation unless such an export had occurred.

Of course, if the system was exported to China, BIS would be the least of his worries. Rather, his more serious concern would be Directorate of Defense Trade Controls (“DDTC”). If the system was, as alleged, designed for the Chinese Navy, then it would be classified as USML Category XI(a)(1) and export to China would be prohibited by section 126.1 of the International Traffic in Arms Regulations (“ITAR”) and punishable by the DDTC.

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