BIS Denial Order Targets US Forwarder That Failed to Improve Compliance Program

BIS originally fined the company, USGoBuy, $20,000 in 2021 for illegally exporting rifle scopes to the United Arab Emirates and China (see 2106170052). Though it agreed to audit its export compliance program and take steps to improve its compliance procedures, BIS said the company “failed to implement corrective actions” and continued to violate the Export Administration Regulations while it was subject to a BIS-imposed probationary period.

The denial order, effective June 14, blocks USGoBuy from participating in transactions subject to the EAR.

Matthew Axelrod, the top BIS export enforcement official, said the denial order should “serve as a warning: if you don’t follow the terms of our administrative settlement and you lack a robust compliance department, you may lose the ability to export at all.” He added that “if a forwarding company -- with an entire business model based on exports -- fails to implement an adequate compliance program even while subject to a suspended denial order, it should not be able to export items subject to the EAR from the United States.”

As part of the original 2021 settlement, BIS agreed to suspend a three-year denial order against USGoBuy as long as the company audited its compliance program and gave BIS a “detailed plan of corrective actions if the audit identified any violations,” among other steps. But BIS said that audit “identified significant continued deficiencies” in the company’s compliance procedures, including 176 “failures” to make Electronic Export Information filings and violations of EAR recordkeeping requirements. It also didn’t make “adequate enhancements” to its compliance controls that would have allowed it to identity items in its packages that may have needed an export license.

“Despite these violations and the significant and continued compliance failures identified through the audit, USGoBuy did not implement corrective actions to address these issues,” the agency said.

BIS also said it worked with Homeland Security Investigations in November 2022 -- after USGoBuy completed its audit -- to “interdict” a shipment of an export-controlled item destined to USGoBuy’s Oregon warehouse, which USGoBuy was scheduled to send to China. The agencies added “conspicuous labels” to the shipping box to let USGoBuy know that the item needed an export license, and the two agencies then replaced the item with one that didn’t need a license. But despite the warnings, USGoBuy exported the package to China “the same day that it was received,” BIS said.

John Sonderman, director of the BIS Office of Export Enforcement, said package forwarding companies can’t “turn a blind eye to their requirements under the EAR.” He said U.S. exporters must “take reasonable steps to identify whether authorization is required for their exports and to obtain authorization when necessary,” and USGoBuy didn’t “despite being aware of its obligations under the EAR and despite being subject to probationary requirements pursuant to the 2021 settlement agreement.”

He added that BIS “will respond aggressively to companies that knowingly fail to comply with the EAR.”

USGoBuy didn’t respond to a request for comment.