This EETimes story, which discusses some of the litigation woes of Altmel disclosed by the company in its SEC filings, mentions one lawsuit that will be of particular interest to the export community.

On June 9, [Nucleus Electronics Ltd. (Hong Kong)] NEHK separately sued Atmel in Santa Clara County Superior Court, alleging that Atmel’s suspension of shipments to the distributor following its appearance on the Dept. of Commerce, Bureau of Industry and Security’s Entity List breached the companies’ distributor agreement. NEHK also alleges libel and other charges against Atmel and is seeking damages of more than $10 million, Atmel said.

NEHK affiliate, TLG Electronics, also in Hong Kong, was added to the BIS Entity List in September 2008 as part of a group of foreign companies that BIS said it had intelligence suggesting were involved in the acquisition and sale of electronic components being incorporated into improvised explosive devices (IEDs) used against U.S. troops in Iraq.

I haven’t looked at the lawsuit, so I don’t know its theory of liability. Certainly it’s not claiming that the distribution agreement obligated Atmel to break the law and export items to NEHK. Perhaps the law suit claims that Atmel at least had an obligation to seek licenses for shipments to it under the distribution agreement. However, the entry on the Entity List for TLG indicates that BIS licensing policy for proposed exports to TLG will be a presumption of denial. This, I think, pretty much relieved Atmel of applying for licenses that it would never get.

Perhaps the argument is that the listing of TLG didn’t justify stopping exports to NEHK. Section 744.11 of the Export Administration Regulations forbids exports to the listed entity and says nothing about related companies. The NEHK lawsuit is, thus, a good occasion to note that distribution agreements with foreign distributors ought to have language permitting immediate termination of the distribution agreement should the distributor or any of its related companies — including parents, subsidiaries and affiliates under common control — are placed on the BIS Entity List.

Even without that language in the distribution agreement, I would be hesitant to export to the affiliate of a listed entity because of the strong probability of diversion of the export to the listed entity.

The Bureau of Industry and Security (“BIS”) just published a settlement agreement with Bruker AXS, the Wisconsin-based manufacturer of precision X-ray systems. The settlement, under which Bruker agreed to pay a fine of $7,500, arose from Bruker’s voluntary disclosure that it exported an EAR99 X-ray system to the Karachi CBW Research Institute University of Karachi’s Husein Ebrahim Jamal Research Institute of Chemistry (“HEJRIC”) in Karachi, Pakistan. HEJRIC is on BIS’s Entity List which means that a license is required for all exports of U.S.-origin items to HEJRIC.

It’s pretty clear what happened here. Bruker never bothered to look at or even check the entity list. This wasn’t an effort to export something that couldn’t be exported to HEJRIC because the entry for HEJRIC on the entity list notes that there is a presumption of approval for license applications for EAR99 items to HEJRIC. The lesson here is that your compliance program should make sure that all lists are checked — particularly since BIS has kindly compiled them in one place here.

UPDATE: As commenter SParis pointed out, HEJRIC was just today removed from the Entitly List.

Michigan-based Delphi Corporation, maker of auto parts and systems, agreed to a $50,000 suspended fine in connection of three exports of triethanolamine to the PRC and to South Africa. The fine will be suspended for a year provided that Delphi commits no further violations and will be waived thereafter. The fine was the result of a voluntary disclosure by Delphi. The charging documents provide no information as to the quantity or value of the exported triethanolamine, so it’s difficult to put the fine in context.

Triethanolamine is a chemical with diverse uses. It is used as an emulsification agent in shampoos, soaps, shaving cream and various cosmetics. It’s also used in metal cleaning and rust removal, and in lubricating and metalworking fluids. (Think of that the next time you wash you hair or use shaving cream!) The automobile industry uses triethanolamine in machining and grinding fluids. It’s also a mustard gas precursor. Because of the ubiquity of triethanolamine, it’s not surprising that it has been the subject of a number of enforcement actions. We’ve reported on enforcement actions relating to triethanolamine exports previously here and here.

It’s not clear why Delphi was exporting triethanolamine, other than to be used by one of its subsidiaries or OEM manufacturers abroad. Delphi does have several locations in China, although it’s not hard to find sellers of triethanolamine in China, such as this one.

Once again, BIS’s charging documents demonstrate that the agency lacks some familiarity with the item that it is regulating, as was the case, recently, with 6-2-4-2 titanium. Although the charging letter correctly spells the name of the exported item, both the Order and the Settlement Agreement state that Delphi exported “triethanolmine,” which, frankly, should have just looked wrong to anyone who knows anything about chemistry and knows why triethanolamine might be regulated as a dual-use item. Again, I’m not simply complaining about a random typo in the charging documents. Certainly, one can find typos here particularly given our, er, leisurely production schedule. But it’s not too much to ask that the charging documents correctly spell the name of the exported item.

According to an article (subscription required) in today’s Inside U.S. Trade, an official of the Bureau of Industry and Security (“BIS”) told an agency advisory committee that the significant increases in penalties enacted by Congress in 2006 for export violations has not deterred exporters from filing voluntary self disclosures of export violations. Thomas Madigan, the director of BIS’s Office of Export Enforcement (“OEE”) told the Rules and Procedures Technical Advisory Committee (“RPTAC”) that exporters filed VSDs at roughly the same rate as last year. He based this assertion on the 167 VSDs filed this year, which is close to the 175 that would be expected at this time in the fiscal year based on the 200 VSDs that were filed during the last fiscal year. (BIS’s fiscal year ends on September 30).

Madigan also gave a partial breakdown for the disposition of the VSDs filed in 2009. Of the 167 filed, four were closed with no action and 14 with warning letters. The bad news, then, is that companies filing a VSD, can pretty much expect a fine. The good news is that none of the 167 VSDs was referred to the Department of Justice for prosecution.