DDTC has announced an administrative settlement (Consent Agreement) with the company, AeroVironment, Inc. for violations of the Arms Export Control Act (AECA) and the International Traffic in Arms Regulations (ITAR) in connection with the unauthorized exports of defense articles, to include technical data, failure to properly maintain records involving ITAR-controlled transactions, and violations of the provisos, terms, and conditions of export authorizations.
AeroVironment, Inc. designs and manufactures unmanned aircraft systems (UAS) and tactical missile systems for use in the government and defense sectors.
The Consent Agreement
While there were only ten charges filed in the Proposed Charging Letter, DDTC made it clear that due, in part to the large number of violations over an extended period of time (between 2014 and 2016), the violations were summarized into five general categories:
- Unauthorized exports of UAS to Canada and failure to obtain End Use Certifications for UAS and parts, components, and accessories exported to Canada;
- Unauthorized exports of technical data in the form of UAS user manuals to Australia, France, Canada, and Thailand;
- Unauthorized exports of Shrike UAS to the United Kingdom;
- Violations of the provisos, terms, and conditions of licenses and other approvals;
- Failure to properly maintain records involving ITAR-controlled transactions.
The Proposed Charging Letter also provided details of factors that led to the mitigation from what the penalties could have been:
- The Respondent submitted 14 voluntary disclosures that acknowledged a portion of the charged conduct and other potential ITAR violations;
- The Respondent instituted a number of self-initiated compliance program improvements during the course of the Department’s review;
- The Respondent entered into an agreement with the Directorate of Defense Trade Controls (DDTC) tolling the statutory period; and
- There was no indication that the violations caused harm to U.S. national security.
The Consent Agreement signed between the Department of State and AeroVironment Inc. requires, among other things such as a viable Compliance program, that AeroVironment, Inc.:
- Pay a penalty of $1.5 Million in installments during the term of the Consent Agreement (2 years). $500,000 of the $1.5.million penalty will be suspended on the condition that this amount shall be applied to defray some of the costs associated with the remedial compliance measures outlined in the Consent Agreement.
- Appointment, with the concurrence of DDTC, of a Designated Official for Consent Agreement Compliance and Oversight (Special Compliance Official or Internal Special Compliance Official) for the term of the Consent Agreement (2 years);
- An Audit to be conducted during the term of the Consent Agreement by an outside consultant with expertise in AECA/ITAR matters and approved by the Director of Defense Trade Controls Compliance (DTCC).
- The requirement to maintain effective export control oversight, infrastructure, resources, policies, and procedures for its AECA and ITAR-regulated activities to ensure compliance with the law and regulations. This includes having adequate resources dedicated to compliance, as well as robust policies and procedures.
The fourteen Voluntary Disclosures filed by AeroVironment Inc. had the desired effect of mitigating the $1.5 million penalty from what it could have been. DDTC’s characterization of “the large number of violations over an extended period of time” certainly makes one wonder what the fines could have been had the Voluntary Disclosures (not directed) not been provided- perhaps another “0” added to the many “0s” in $1.5 million. US Regulatory agencies all deliver the same simple message:
Disclosure = Mitigation
There is no way to know the extent or existence of AeroVironment Inc.’s Compliance Program with written policies and procedures during the timeframe in which the violations were committed; but whatever existed was obviously not effective. AeroVironment Inc. will be one of those companies that will most likely be a Better Compliant Company because of the Consent Agreement.
If you need assistance in reviewing your export compliance program, please contact Export Solutions for a free consultation.
Jim McShane is a Sr. Consultant, Trade Compliance for Export Solutions -- a full-service consulting firm specializing in ITAR and EAR regulations.