On January 29,2020, Airbus SE of the Netherlands became another cog in the wheel of export enforcement. Airbus agreed to a settlement with DDTC of $10 million covering 75 violations of the Arms Export Control Act (AECA) and Part 130 of the ITAR for the time period 2011 through 2019.
Outline of Violations
The violations are as follows:
(1) Failure to report accurate ITAR Part 130 statements for fees or commissions paid to facilitate sales as required by 22 CFR 120.9;
- The charging letter indicates the Airbus lacked formal policies and procedures at the corporate level to address Part 130 Compliance;
- While the company understood the lack of properly reporting Part 130 fees or commissions, there was a lack of understanding by the local export compliance personnel as to what constituted a non-export control issue versus an export control issue, therefore leading to the continued failure to report the fees and commissions.
- Additionally, the Empowered Officials did not have access to the company’s database that might have allowed them to capture the Part 130 payments and were forced to rely on written records found across several countries/continents where Airbus has a presence.
(2) Failure to maintain require ITAR Part 130 records;
- DDTC noted Airbus failed to have a dedicated process to record Part 130 payment accurately for reporting purposes.
(3) Unauthorized reexports of defense articles from Spain to Australia;
- Failure by Airbus procurement department to advise the intended end-user was Northrup Grumman in Australia and a failure to ensure that the end-user was an approved end-user of the license followed by a failure to obtain the necessary license authorizations to ship to Australia.
(4) Unauthorized retransfers of defense articles in Spain;
- Airbus Spain and Airbus Helicopters Espana A. ("AH Spain") without authorization retransferred defense articles, including technical data to Babcock Mission Critical Services Fleet Management S.A.U., its affiliates, sub-contractors and predecessors ("Babcock") in Spain.
Consent Agreement Details
To settle this Consent Agreement, Airbus has agreed to the following:
- Ensure adequate resources are dedicated to ITAR compliance throughout the Airbus organization
- 3-Year period of an assignment of Special or Internal Compliance Officer and extensive remedial compliance measures to include:
- Development of policies and procedures to comply with AECA and ITAR requirements
- Implementation of the Consent Agreement
- Strengthened Compliance policies, procedures and training
- Audits – 2 audits must be conducted during the term of the Consent Agreement, which must be conducted by an outside consultant with expertise in ACEA/ITAR matters.
- Payment of $10 million ($5 Million shall be paid in three installments; $5 Million shall be assessed for remedial compliance measures, but suspended on condition of the completion of remedial measures).
Prosecution by other Agencies
Airbus will additionally enter into a deferred prosecution Foreign Corrupt Practice Act (“FCPA”) agreement with the Department of Justice in connection with criminal information filed on January 28, 2020, and will reportedly pay over $517 million dollars. The FCPA charge arose out of Airbus's scheme to offer and pay bribes to foreign officials, including Chinese officials, in order to obtain and retain business, including contracts to sell aircraft.
According to the Department of Justice Charging Letter, Airbus engaged in and facilitated a scheme to offer and pay bribes to decision makers and other influencers, including to foreign officials, in order to obtain improper business advantages and to win business from both privately-owned enterprises and entities that were state-owned and state-controlled.
Additionally, between 2013 and 2015, Airbus engaged a business partner in China and knowingly and willfully conspired to make payments to the business partner that were intended to be used as bribes to government officials in China. These payments were in connection with the approval of certain agreements in China associated with the purchase and sale of Airbus aircraft to state-owned and state-controlled airlines in China. In order to conceal the payments and to conceal its engagement of the business partner in China, Airbus did not pay the business partner directly but instead made payments to a bank account in Hong Kong in the name of a company controlled by another business partner.
Lastly, while the Airbus woes may have been addressed between DTTC and the Dept. of Justice, Airbus must still contend with additional prosecution in both the United Kingdom and France.
The bottom line is no matter how large or small your organization is, you must be able to account what your Sales Department is involved in. If your organization is involved in the DDTC/ITAR world, you must, as an Empowered Official, understand what your Sales group is participating in and be able to track what decisions are made to meet all of their sales requirements whether they are based on U.S. export requirements or foreign export requirements.
We are here to help you if you need it. Contact Export Solutions for a free consultation.
Beverly Demma is a Sr. Consultant for Export Solutions -- a full-service consulting firm specializing in U.S. import and export regulations.