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Metal Forging Company Agrees to Fine for Titanium Exports (UPDATED)
Posted by Clif Burns at 4:42 pm on June 3, 2009
Category: General
Firth Rixson Monroe, a specialty metals forger, recently agreed to pay $85,000 to the Bureau of Industry and Security (“BIS”) to settle charges that the company exported, on three occasions, 1,055 pounds of 6-2-4-2 titanium alloy billets worth about $35,000 to the People’s Republic of China. The company voluntarily disclosed these three exports to BIS.
The 6-2-4-2 titanium alloy can be used in aerospace and missile applications requiring an alloy capable of resisting high temperatures and maintaining high tensile strength. The “6-2-4-2” designation used here with titanium is shorthand for Ti-6Al-2Sn-4Zr-2Mo and signifies the other metals used in the alloy, specifically aluminum (6%), tin (2%), zirconium (4%) and molybdenum (2%). This alloy is classified under ECCN 1C202 because it exhibits an ultimate tensile strength of 900 MPa at 20° and because, apparently, the billets had an outside diameter in excess of 75 millimeters. (Tensile strength specifications for 6-2-4-2 titanium, and other titanium alloys, can be found here.)
The alloy designation for the titanium billets seemed to cause considerable confusion for the enforcement staff. The order interpreted it to mean that 6,242 billets had been exported. The charging letter turned 6-2-4-2 into 6,242 pounds of titanium. Only the settlement agreement got it right. The charging letter also stated that the exports went to Chile. The agency’s confusion over the destination of the exports in the charging letter somehow seems more understandable than the agency’s confusion about the standard practices by the engineering community for designating particular alloys of titanium. The 6-2-4-2 designation was, after all, what allows the conclusion that the alloy was indeed covered by ECCN 1C202.
UPDATE: BIS has removed the settlement documents to which I linked in this post, presumably to correct the errors that I pointed out or that they learned from other sources.
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5 Comments:
I haven’t had the honor of negotiating a full settlement package with OEE, so the protocol isn’t quite clear to me. Is it correct to infer that respondents, which likely would catch and fix errors of the sort you highlight, are generally not given the opportunity to review drafts of the charging letter and order prior to finalization?
Since the Settlement Agreement references both the Charging Letter and the Order, the respondent should have the opportunity to see both. My guess is that the Respondent, if it noticed these errors, may have decided not to point out the errors on a theory that it should let sleeping dogs lie and not risk having BIS change its mind as it re-did the documents.
Proposed charging letters and settlement agreements are prepared by attorneys in BIS’s Office of Chief Counsel, not OEE. Chief Counsel’s office generally works with the investigating OEE agent in preparing proposed charging letters.
The draft documents are reviewed by BIS’s Administrative Case Review Board (ACRB) before they are issued. The ACRB is made up of the Deputy Assistant Secretary for Export Enforcement, the Chief Counsel, and the Directors of OEE, the Office of Antiboycott Compliance and the Office of Enforcement Analysis.
ECCNs in enforcement cases are generally, but not always, supported by a licensing determination issued internally to BIS, by the Office of Export Administration.
So, all that said, it’s somewhat surprising that these errors weren’t caught in the internal BIS review before the documents were issued by BIS. I do think it’s the Government’s responsibility to get its facts straight before it charges a person or business entity with violating the law, even in instances in which a party has admitted/self-disclosed a violation. The Government shouldn’t just take a disclosure on its face as defacto evidence of a violation; when I was at BIS we had many self-disclosures that resulted in a finding that the disclosing party was in error and a violation had not in fact occurred.
We can assume I think for purposes of discussion here that the disclosing party agreed with BIS’s conclusion that violations had occurred, even given the errors evident in the settlement documents. But, since there seems to be an open question about the number of billets involved, suppose the billets also did not meet the 75mm criteria of the ECCN? Were that the case, is it possible that a different ECCN might apply, one that would not require a license – and thus, would mean that no violation had in fact occurred?
One hopes that BIS will pay stricter attention to getting the facts right in its enforcement cases, and ensure it only issues penalties where violations have in fact occurred. Parties involved in BIS penalty cases, self-disclosed and otherwise, should carefully review all proposed and actual penalties issued by the agency to ensure they are both legally and factually supported – don’t just assume that BIS’s enforcement pronouncements, are the final word.
To answer Pat B’s question, yes, respondents have the opportunity to review the documents prior to finalization – usually, there are ongoing disucssions with the Office of Chief Counsel; and in any event, a respondent could point out errors and ask they be corrected, before signing an agreement.
One major problem is the sheer number of regulations concerning which exporters have to be familiar in order to remain in compliance. It is a veritable Alphabet soup, or rather a legal bowl of spaghetti, that any sincere and honest firm will eventually run afoul of due to the painstakingly minute details of compliance regulations.
In my opinion governments, both the UK and the USA, would best serve entrepreneurs and the business community by publishing more easily accessible compliance information, AND by better training their staff.
This firm disclosed its exports voluntarily which indicates good faith. That they were slapped with a fine of this magnitude is an example of the anti-business environment rapidly pervading Western governments.
