BIS recently announced a settlement with Mohawk Global Logistics Corporation for $155,000 ($20,000 of which was suspended if Mohawk behaved itself during a probationary period).   The penalty arose out of Mohawk’s export of items to institutions on the Entity List without the required license.  In both instances, Mohawk screened against the list, but things went wrong.

One of the exports went to the University of Electronic Science and Technology of China (“UESTC”).  Rather than screen against the full name of the university, Mohawk just screened the university’s commonly-used acronym — UESTC.   As a result, it failed to flag the transaction.  BIS, in the charging documents, noted that the address it had for UESTC was a “near-match” (whatever that means) to the address shown for UESTC on the Entity List.  The take-away here, of course, is that exporters should screen entire names and addresses.

One of the other exports was to the All-Russian Scientific Research Institute of Experimental Physics otherwise known as VNIIEF (because the name in Russian – Всероссийский Научно-Исследовательский Институт Експериментальной Физики [Vserossiyskiy Nauchno-Issledovatelckiy Eksperimentalnoy Fiziki] — is abbreviated as ВНИИЕФ or VNIIEF when transliterated to the Roman alphabet — got that?).  Now for this export the transliterated Roman abbreviation resulted in a hit, which, for some unexplained reason, the Mohawk export supervisor simply ignored.

A footnote dropped by BIS on VNIIEF reveals the perils of foreign language names and the Entity List.   The initial listing was for the “All-Union” Scientific Research Institute of Experimental Physics.  When this was updated to the correct “All-Russian” Scientific Research Institute of Experimental Physics in 2011, the common acronym VNIIEF (but not ARSIEP, which is, clearly, a better acronym) was added.  But searches of VNIIEF, the common name of that entity, prior to 2011 would not have turned up anything.   The moral of this story:  don’t search abbreviations or acronyms.

The fine here seems high.   The goods involved were EAR99 items and worth, in total, about $200,000.  A license probably would have been granted if requested so there’s no palpable harm to national security here.  And Mohawk tried to screen but just did not do a very good job of it.  However, it’s not like they, like many exporters, did not even try to screen the recipients.   Granted the inexplicable activity of the Mohawk supervisor in overriding the hit for VNIIEF would permit some aggravation of the penalty.  And perhaps the failure to screen addresses when they had a “near match” of the correct address further annoyed BIS.  But it seems to me here that BIS is fining incompetence rather than malice.

https://efoia.bis.doc.gov/index.php/documents/export-violations/export-violations-2018/1193-e2561/file

The Bureau of Industry and Security (“BIS”) recently announced that Pilot Air Freight had agreed to a $175,000 fine ($75,000 of which was suspended) to settle charges that it had aided and abetted an attempted unlicensed export by one of its customers (against whom there is no record of any enforcement action) to IKAN Engineering Services, a company on the BIS Entity List. This seems rather high for what was essentially a software glitch.

According to the charging documents, Pilot had multiple interfaces for entering shipping data.  Its main interface, called “Navigator,” was linked to proprietary screening software that would screen shipment recipients against the Entity List and other relevant screening lists.   A second interface, called “Co-Pilot,” allowed customers to enter shipment data.   Apparently, entries made in “Co-Pilot” weren’t linked back to the Navigator screening software, so when a customer entered a shipment to IKAN, the shipment was not flagged.   It was apparently intercepted by Customs when it reached the Port of Long Beach.

There is nothing in the charging documents to suggest that Pilot knew of this glitch in its automated screening system.  It apparently thought that shipments were being screened.  This is unlike those cases where the exporter did not know of its obligation to screen shipments or knew of its obligation but decided not to screen certain shipments.   Certainly BIS has every right to penalize Pilot here, but the penalty should have taken into account what appear to have been the innocent and unintentional origins of the problem.   Almost everyone uses automated screening and would now appear to be at the mercy of the robots they employ to do the screening and the techies they hire to program the robots.

There’s another interesting wrinkle in the charging documents that BIS more or less glosses over.

Pilot failed to flag this transaction even though the name and address in its possession closely matched the Entity List listing for IKAN.   As Pilot has acknowledged to BIS during this matter, properly configured screening software would have identified the attempted export as involving a listed entity and flagged it for review.

Even though BIS acknowledges that this was not an exact match, we have no idea how inexact the match was.  Even though Pilot agreed that it was not so inexact that it would have been missed by its screening software , it is hard to tell whether they really believed that or felt compelled to say it to keep BIS happy.  The failure of BIS to reveal the name used by the shipper suggests that the match might not have been as close as BIS would now have us believe.