Encryption Export Controls

on Friday, 24 October 2014. Posted in Export Control Reform

The recent Wind River settlement for $750,000.00, which was imposed for the export of 55 encryption items valued at $2.9 million and made without proper authorization and to restricted parties, should alert all developers, manufacturers, and brokers of encryption products to review their processes and procedures for managing their exports.

It should be noted that the settlement was the result of a voluntary self-disclosure. According to the Assistant Secretary of Commerce for Enforcement, David W. Mills, “Because the violations were voluntarily disclosed, the company received significant mitigation,” and the proposed charging letter would indicate that the penalty could have been as high as $13.750 million. Assistant Secretary Mills cautioned that “This penalty should serve as a reminder to companies of their responsibility to know their customers and, when using license exceptions, to ensure their customers are eligible recipients.”

Processes and procedures need to be reviewed periodically for any changes to business models, for any new employees, and for compliance system process breakdown. Particular attention needs to be paid to the encryption controls found in Sections 742.15 and 740.17, some of the most complex in the Export Administration regulations. Their proper implementation will protect the interests of U.S. exporters and many, if not all, of their foreign trading partners.

Under the guidance of Craig Ridgley - Managing Partner for MK TCG and one of the country’s top global encryption controls experts - MK TCG can effectively and efficiently assess your export compliance program. MK TCG can also review your export classifications to ensure they are consistent with recent changes in encryption controls, and can perform comprehensive or random sample audits (whichever is appropriate) of your encryption exports to determine if process breakdown has already occurred. In the unfortunate event you find that your company has violated U.S. export controls, MK TCG can help you with the tasks necessary to prepare and submit a voluntary self-disclosure.

For more information please call 202 621 5484

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