By Tom Reynolds, Export Solutions

Recently, a Washington-based manufacturer of printed circuit boards (PCBs) found out how costly it can be to ignore U.S. export regulations. Precision Image Corporation and its owner, Chih-Kwang Hwa, plead guilty to charges that it violated the ITAR. The company faces fines of up to $1 million and Hwa could be sentenced to as much as 20 years in prison.

According to the U.S. Department of Justice, between 2009 and 2011, Hwa obtained contracts to supply the U.S. Navy with a variety of printed circuit boards. The value of these contracts was approximately $180,000. In his communications with the Navy, Hwa falsely stated that these boards would be manufactured in the United States, when in fact, he was sending the technical data to a Taiwanese manufacturer for the boards to be produced there. The U.S. Navy supplied Hwa with technical specs for these boards, and that information is controlled on the United States Munitions List (USML) under the ITAR.

By failing to obtain the necessary licenses or agreements to export the data and manufacture the PCBs abroad, Hwa committed a violation of the ITAR. The Justice Department also charges that Hwa knew about these restrictions at the time he received the technical data from the Navy.

From the press release:

“U.S. export controls are in place to keep sensitive technology from falling into the hands of our nation’s enemies,” said Brad Bench, special agent in charge of HSI Seattle. “One of HSI’s highest priorities is to prevent illicit procurement networks, terrorist groups, and hostile nations from illegally obtaining military items and controlled dual-use technology.”

U.S. prosecutors are recommending that Hwa pay a fine of $300,000 and serve a prison sentence between 15-21 months. As always, that’s a steep price to pay for $180,000 worth of contracts! Let’s assume for a moment that Hwa did not knowingly violate the ITAR and was simply unaware of these restrictions. At that time, he could have taken a small percentage of his contract award and invested it in some training and compliance activities, thereby avoiding all this trouble. However, there’s likely more to this story than simple ignorance, since the government has charged the defendant with criminal (and not civil) violations.

Sentencing is scheduled for October 28, 2013. You can read more about the case here.

Tom Reynolds is the President of Export Solutions, a consultancy firm which specializes in helping companies with import/export compliance.