On April 5th, the Department of Justice announced the indictment of several companies and the forfeiture of over $800,000 as a result of an attempt to smuggle dual-use U.S. manufactured jig grinders from Latvia to Russia without an export or reexport license. The forfeiture includes funds transferred to the U.S. manufacturer as payment for the sale.
Incidents like these highlight the importance of receiving an end use statement for all exports, even for exports which do not require a license and even for items classified as EAR99. An end use statement is an important part of your company’s due diligence in complying with U.S. export laws and regulations and also covers you should your items be diverted to a sanctioned destination.
Companies should also be aware of any red flags that may be apparent in the lead up to the transaction including:
-Use of corporate vehicles (i.e., legal entities, such as shell companies, and legal
arrangements) to obscure (i) ownership, (ii) source of funds, or (iii) countries involved,
particularly sanctioned jurisdictions;
-A customer’s reluctance to share information about the end use of a product, including
reluctance to complete an end-user form;
-Use of shell companies to conduct international wire transfers, often involving financial
istitutions in jurisdictions distinct from company registration;
-Declining customary installation, training, or maintenance of the purchased item(s);
IP addresses that do not correspond to a customer’s reported location data;
-Last-minute changes to shipping instructions that appear contrary to customer history
or business practices;
-Payment coming from a third-party country or business not listed on the End-User
Statement3 or other applicable end-user form;
-Use of personal email accounts instead of company email addresses;
-Operation of complex and/or international businesses using residential addresses or
addresses common to multiple closely-held corporate entities;
-Changes to standard letters of engagement that obscure the ultimate customer;
-Transactions involving a change in shipments or payments that were previously
scheduled for Russia or Belarus;
-Transactions involving entities with little or no web presence; or
-Routing purchases through certain transshipment points commonly used to illegally
redirect restricted items to Russia or Belarus. Such locations may include China
(including Hong Kong and Macau) and jurisdictions close to Russia, including Armenia,
Turkey, and Uzbekistan.
This Blog is made available by Wilmarth & Associates for educational purposes as well as to give you general information and a general understanding of export law and compliance, not to provide specific legal advice. This blog is not legal advice and should not be treated as such. You must not rely on this blog as an alternative to legal advice from your attorney or other professional legal services provider. The information provided on this website is presented “as is” without any representations or warranties, express or implied.