Chip Industry Supplier Fined After BIS Says It Failed to Address Russia Red Flags
The Bureau of Industry and Security fined a U.S.-based electronics manufacturer and supplier for the semiconductor industry $180,000 after it admitted to exporting 11 shipments to Russia without a license. BIS said the company, Indium Corporation of America, which has factories in Asia and Europe, failed to resolve multiple red flags involving shipments of solder wires, solder ribbon and solder preforms to a Russian defense contractor.
Sign up for a free preview to unlock the rest of this article
Export Compliance Daily combines U.S. export control news, foreign border import regulation and policy developments into a single daily information service that reliably informs its trade professional readers about important current issues affecting their operations.
The violations, which Indium admitted to, took place between April 2022 and March 2022, all involved items controlled by the Export Administration Regulations as EAR99 -- which are generally low-level technology items that don’t require a specific license. But the items shipped by Indium did require a license because they were subject to specific controls for certain Harmonized Tariff Schedule codes when destined to Russia or Belarus, BIS said in a settlement agreement released Dec. 23.
BIS said certain information voluntarily disclosed by Indium showed that the company “failed to appropriately address red flags throughout the transactions,” which were worth $96,505.89. Those red flags included a customer that asked Indium for a “last-minute” change to the shipment route and for Indium to delete information related to Russia from shipping documents.
The agency said Indium cooperated with BIS and took "remedial measures" after discovering the violations, which led to a "significant" penalty reduction, according to an emailed BIS press release.
“Companies that continue to export items to Russia must ensure those items do not fall under a prohibited Harmonized Tariff Schedule code,” said Matthew Axelrod, the assistant secretary for export enforcement. “Indium failed to do so, and this is the result.”
The violations began after the head microelectronics sales specialist from Ostec Integra Ltd., a Russian defense contractor and electronics supplier, asked Indium for a quote for a shipment of solder ribbon in March 2022. Ostec began buying the items using Poland-based Inter-Trans Sp z.o.o and Germany-based BMA Spedition GmbH, two freight forwarders that acted as the intermediate consignees.
BIS said the first red flag arose after Ostec placed an order -- which was scheduled to first stop in Germany -- and one of the company’s logistics specialists asked Indium to instead ship the ribbon to Hong Kong. Ostec explained to Indium that “shipments are easier to send to Russia from Hong Kong,” according to BIS.
BIS said it has issued guidance that has said Hong Kong is a “common location for the transshipment of items” to Russia and Belarus, and that “last minute changes to transactions associated with an originator in Russia are a red flag" (see 2410040014 and 2303020054).
The agency also pointed to another red flag that Indium should’ve caught: irregular shipping routes or suspicious involvement of third parties. BIS noted that all of Ostec’s orders stated that Polish forwarder Inter-Trans Sp would serve as the purchaser, while all the items would first be shipped to Germany. “Shipments planned for out of the way destinations and payments coming from third-country parties or businesses not on an end-user certificate are red flags,” BIS said.
It also said, in one instance in March 2023, Inter-Trans asked Indium to delete “certain personnel and Russian phone numbers” from certain shipping documents to avoid “problems” with the shipment. Indium “complied with these instructions,” BIS said, adding that “last minute changes to shipping instructions that appear contrary to customer history or business practices are a red flag.”
If Indium doesn’t pay its fine or violates the terms of its settlement agreement with BIS, the agency said, it may revoke its export privileges for one year. The company didn’t immediately respond to a request for comment.
The Office of Foreign Assets Control in May 2023 sanctioned Inter-Trans, BMA Spedition, and all 12 companies of the Ostec Group for procuring items for the Russian defense industrial base. Those designations took effect after Indium’s violations, BIS said.