Last week the Directorate of Defense Trade Controls (“DDTC”) announced that it had fined Intersil Corporation, a California-based manufacturer and developer of semiconductors and integrated circuits, $10,000,000 of which $6,000,000 goes to Uncle Sam and the remaining $4,000,000 goes to Intersil’s compliance program and remedial measures. Along with the fines, DDTC has required Intersil to jump through a number of now-typical compliance and re-education hoops, including appointing an ombudsman, hiring a special compliance officer, rewriting its compliance programs, engaging in audits, making frequent reports to DDTC and writing “I will not violate the ITAR” three million times on a blackboard after school. Well, of course, only the last item was not actually required.

According to the Proposed Charging Letter, Intersil incurred the ire of DDTC by classifying certain of its products as ECCN 3A001.a.1, 3A001.a.2, and EAR99 even though the items were radiation hardened and space qualified and, therefore, covered instead by USML Category XV(e). Why Intersil made this mistake is not revealed in the documents but since Intersil was applying for BIS licenses for the goods when required, it is hard to imagine that it was anything other than a good faith mistake (which is, probably, the reason why this information is omitted.) As a result, there were 3,152 unauthorized exports of Intersil’s products, although, due to the statute of limitations, only 339 exports were actually charged, with DDTC swearing left and right that although it couldn’t help mentioning the 3,152 exports it was paying absolutely no attention whatsoever to those in formulating the $10 million penalty.

But here is the most interesting part of the charging documents:

Several of the unauthorized exports were subsequently re-exported or retransferred without authorization due in part to the misclassification of the ICs.On August 20, 2010, a DDTC official misinformed Intersil that for any ICs that “HAVE already been exported under EAR jurisdiction, these [ICs] ARE NOT retroactively subject to the retransfer provisions of 22 CFR 123.9.: Intersil was further misadvised that Intersil did not need to inform its foreign customers to submit ITAR re-export authorization for these items and that this “decision to not retroactively aply USML controls for these already exported [ICs] will continue to be applicable even if a future formal CJ determination asserts USML controls apply.”

Interestingly, notwithstanding this bad advice, Intersil is charged with causing various unauthorized re-exports from, and retransfers in, foreign countries due to its misclassification of the integrated circuits. Whether or not any of these were the result, at least in part, of DDTC’s admittedly bad advice that the retransfer provisions would not apply to items exported under the EAR is not clear, but let’s give DDTC the benefit of the doubt and assume that these were all unrelated.

Even so, there is still an interesting moral to this story. Exporters who make mistakes have to pay large fines and engage in burdensome remediation activities. DDTC officials who make mistakes have to do, er, well, nothing at all because, well, you know, mistakes happen. As they say, it’s good to be the king.