Enforcement Spotlight: German Tech Company Fined by BIS
- Erika Trujillo
- 5 days ago
- 4 min read
A German Tech Company has been Fined $1.5m by Commerce / BIS for its Affiliates’ In-Country Transfers of EAR99 items to Prohibited Entity in China.
The US Bureau of Industry and Security (BIS) recently reached a $1,500,000 settlement with a Germany tech engineering company to resolve allegations of 13 violations of the Export Administration Regulations (EAR). The subsidiary of the German firm in China transferred US-origin EAR 99 items to a party on the Entity List in China without the correct licenses from Commerce / BIS.
The Violations: Facilitating Transfers to SMIC Beijing
Between March 2021 and March 2022, the subsidiary in China facilitated the purchase and transfer of approximately 884 items subject to the EAR to Semiconductor Manufacturing International (Beijing) Corporation (SMIC Beijing). At the time, SMIC Beijing was on the BIS Entity List, requiring a license for any export, reexport, or in-country transfer of items subject to the EAR.
The items involved—including flowmeters, pressure transmitters, logic controllers, and voltage sag protectors—were classified as EAR99. While these items do not require a license for most global destinations, their transfer to an Entity List party like SMIC Beijing triggered a mandatory licensing requirement.
The Compliance Gap: Overlooking "In-Country" Rules
The subsidiary in China failed to recognize that US export controls follow US origin goods, regardless of where they are located. The subsidiary’s compliance program was found to be inadequate because it did not address the specific licensing requirements for engaging with local distributors in China. That gap in the Trade Compliance Program allowed the subsidiary to deliver US-origin items to a restricted customer within the same country.
Mitigation and Resolution
Upon discovering the transfers, the subsidiary took the following steps:
Voluntary Self-Disclosure: The company investigated the matter and voluntarily disclosed the transactions to BIS.
Program Improvements: The company made significant investments in and improvements to its corporate compliance program.
As a result of these mitigating factors, BIS settled the 13 charges for a civil penalty of $1,500,000.
Key Lessons for Industry
"Subject to the EAR" applies outside the US: US jurisdiction follows US origin items no matter how many times they have been re-exported. Even EAR99 items, which are generally low-risk, may require a license, especially when transferred to a party on the Entity List.
In-Country Transfers Matter: Trade Compliance Programs must also monitor domestic transfers for U.S. trade compliance. Just because a supplier and a customer are in the same foreign country does not mean US export controls do not apply, and this is especially so in China.
Entity List Vigilance: Companies must ensure their subsidiaries and local procurement teams understand that dealing with any party on the BIS Entity List involves significant regulatory risk and diligent review of the business involved.
Assurance Monitoring is Critical: Monitoring for red-flags like domestic China business involving U.S. origin items and BIS Entity parties without a license would have avoided these violations.
Self-Disclosure is Vital: The decision to voluntarily disclose and remediate its compliance gaps was a key factor in reaching a settlement and avoiding more severe administrative sanctions.
DON'T LET THIS HAPPEN TO YOU!
SEIA's PERCEIVE: Data-Driven Root Cause Analysis for Strategic Trade Compliance
The recent Commerce/BIS enforcement case serves as a powerful demonstration of why advanced data analytics solutions and compliance assurance are becoming increasingly important. SEIA PERCEIVE is specifically desinged to identify risk exposure for this kind of scenario by continuouly monitoring for red flags and potential program gaps.
SEIA PERCEIVE is specifically desinged to identify risk exposure for this kind of scenario by continuouly monitoring for red flags and potential program gaps.
In fact, SEIA has proactively highlighted risk indicators for this exact scenario with other customers allowing them to such prevent violations. For example, we have highlighted potential risk on orders for inter-China tranactions that contained U.S. origin items and involved a party likely to be on the BIS Entity List. By alerting the team to the risk before the order was completed, they were able to review the transactions and make any necessary adjustementsto provent violations like the German company's from occuring.
At SEIA we empower trade compliance organizations by leveraging data across the company to gain critical transparency, while also supporting the proactive identification of risk exposure. SEIA’s advanced data analytics can identify patterns and anomalies that would be impossible for internal human analysts to detect manually, while providing guidance and understanding on the root cause of the issues.
This proactive approach ensures that organizations can identify and address potential compliance issues before they develop into violations. Rather than discovering problems through external enforcement actions or media reports, PERCEIVE enables organizations to detect and remediate issues through their own internal monitoring processes, significantly reducing exposure to criminal liability and reputational damage, and saving the company valuable time and resources.
To learn more about how SEIA can empower your organization or help you avoid this kind of enforcement scenario, reach out to us today: Contact
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