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By Tom Reynolds

Here’s a recent story courtesy of www.NJ.com.  Swiss Technology, Inc., of Clifton, New Jersey, was recently penalized for violating U.S. export control regulations, specifically the International Traffic in Arms Regulations (ITAR).  According to this news story, the company was sentenced to two years probation and a $1.1 million fine.

On its website, Swiss Technology describes itself as a diversified manufacturing company that has supplied “almost a thousand unique NSNs [National Stock Numbers] to the U.S. Department of Defense over the past 25 years.”  The company engages in machining, fabrication and assembly of various products for the defense, aerospace and commercial markets.  This includes components for small arms, aircraft engines and motion control products.

According to U.S. Attorney Paul Fishman, who made the announcement, Swiss Technology was awarded a variety of government contracts to manufacture parts for rifles and military machine guns.  However, instead of making these items in the United States, the company was charged with illegally farming this work out to another company in China.  This included sending drawings and specifications to the Chinese firm.

Under U.S. export control regulations, it is a violation to export defense articles – including technical data – to a foreign country without prior approval from the U.S. government.  Although Swiss Manufacturing could have applied for export licenses to send these drawings to China, it is uncertain whether such licenses would have been approved by the government.  That’s because the United States maintains an arms embargo against China (among other countries) as described in ITAR §126.1.

These days, it seems that almost every company looks to China as a source for cheap labor.  But when it comes to export control regulations, the million-dollar penalty, bad publicity and probation – not to mention the threat to U.S. national security – can far outweigh any cost-savings that might be realized by sourcing overseas.

This story serves as a good reminder for any company trying to comply with ITAR and EAR.  It’s critical to have the right policies and procedures in place to avoid costly mistakes like this.