Nov

10

Scope Seller Winds Up in BIS’s Sights

Posted by at 8:11 pm on November 10, 2008
Category: General

Cabela'sCabela’s, the mammoth hunting and outdoor supplies retailer, was recently smacked with an equally mammoth $680,000 fine by the Bureau of Industry and Security (“BIS”). The fine was paid by Cabela’s to settle charges that it exported rifle scopes without a BIS license. According to the BIS press release, Cabela’s engaged in 76 unlicensed exports of rifle scopes between 2004 and 2005 to such destinations as Argentina, Brazil, Canada, Chile, Finland, Ireland, Malaysia, Malta, Mexico, Pakistan, the Philippines, South Africa, Sweden, and Taiwan. BIS also alleged that Cabela’s failed to file shipper’s export declarations for these unlicensed exports.

In 2007, the publicly-traded firm had over $2.3 billion in revenues and earned almost $90 million in profits. The $680,000 fine is substantially higher than the normal BIS fine, even after the penalty increase passed by Congress last year. BIS likely took the company’s size into account in reaching a penalty that wouldn’t be easily forgotten.

Another reason for the high fine is that this isn’t Cabela’s first time at the export rodeo either. In 2005 Cabela’s settled similar charges relating to 685 unlicensed exports of rifle scopes between 1999 and 2000 and agreed to pay a $265,000 fine to BIS. It seems likely that the exports involved in the current settlement occurred, at least in part, after BIS had informed Cabela’s of its investigation of the 1999-2000 exports.

Notwithstanding these run-ins with BIS, the website for Cabela’s still says nothing about the requirement for export licenses for rifle scopes to most destinations. Ironically, however, the website’s terms and conditions state that customers leaving product reviews agree not to submit any content that “violates any law, statute, ordinance or regulation (including, but not limited to, those governing export control. …)” Perhaps the company should worry less about whether product reviewers are violating export laws and more about whether its own sales and shipping departments are violating those same laws.

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Copyright © 2008 Clif Burns. All Rights Reserved.
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4 Comments:

Poor Mr. Pulangun, an ordinary foreign business man who arguably was confused about US regulations, goes to jail just for trying to score a hundred rifle scopes to take back home. But Cabela’s does it for a second time and only gets a civil penalty? The CEO should at least have to go hunting with Dick Cheney.

Comment by Mike Deal on November 11th, 2008 @ 12:16 pm

Agreed. There should be harsher penalties for these types of violations. $680,000 isn’t squat to a company that big.

Comment by Brandon on November 13th, 2008 @ 7:08 am

Or maybe Justice and DDTC have better things to do than puffing up their export control body count by going after individuals and small businesses that can’t afford high price defense counsel and who probably don’t have the resources or even the awareness of a need for a comprehensive internal compliance program.

Justice is actively trying to reduce the scienter requirement for criminal convictions by judicial decision rather than legislation, not just in the jury instructions but in the way they word indictments, purposely departing from the language of the statutes, which makes it easier to get indictments out of a grand jury and a conviction out of a jury.

They’re also pushing the theory that a post-complaint agency certification as to jurisdiction or classification can’t be challenged because they assert it is a non-reviewable “political question”. The latter is particular B.S. because CIT does HTS classifications all the time, even though the HTS is a product of an international convention, yet the Supreme Court in U.S. v Mead held that HTS classifications by CBP are not entitled to Chevron deference. The Court relied on Mead in Oregon v. Gonzales, so its not just limited to Customs law.

DDTC needs to put some of the money from its unconstitutional export tax (the per license portion of the mislabeled registration fee) into education and outreach for small business, rather than rely on the always oversubscribed and expensive SIA.

Comment by Mike Deal on November 13th, 2008 @ 10:45 am

Cabela’s obviously knew of the requirements for licensing but Mr. Deal brings up a good point. The dearth of any kind of relevant outreach/education program from the DOS leads to the conclusion that the emphasis is not on prevention. The SIA is an arms length organization and with hundreds of people attending a conference they are not conducive to learning for an intermediate person let alone a beginner. There are other groups who do training but if you don’t know about the regs. how do you know about them or the SIA?

One of my first reactions when the new fee schedule came out was to wonder if the $250/license would be necessary if every American company who makes a defense article was aware of their need to register. How many of them don’t even know about the ITAR until it’s too late?

Comment by LDM on November 13th, 2008 @ 1:37 pm