Integra Technologies Settles Export Control Violations with Reduced Penalties
In a recent settlement with the Bureau of Industry and Security (BIS), Integra Technologies, a California-based semiconductor manufacturer, agreed to pay half of a $3.3 million civil penalty for illegally exporting sensitive technology to Russia. This case underscores the importance of robust compliance programs in navigating increasingly stringent trade controls amid escalating geopolitical tensions with Russia and China.
The Violations
Between February 27, 2023 and October 27, 2023, Integra committed 94 violations of the EAR. These violations involved the unauthorized export of transistors and related products—classified as EAR99 under HTS code 854129—to eight Russian end-users without obtaining the required export licenses. The products, valued at $6,679,009, were sold through two third-party distributors and shipped using foreign-based freight forwarders.
Despite using intermediaries, Integra was aware of the ultimate end-user because it required disclosure of its details. On February 24, 2023, BIS added HTS code 854129 to the list of controlled items requiring export licenses to Russia under Section 746.5 of the EAR due to its potential use in supporting the Russian war effort. Integra’s failure to update its compliance program in response to this regulatory change led to the unauthorized export of these transistors and other controlled items.
Compliance Failures
Integra’s case highlights the risks of an inflexible compliance program that fails to adapt to evolving regulations. Key shortcomings included:
Failure to Update Compliance Practices: Integra did not adjust its processes to meet the newly imposed license requirements for exports to Russia.
Insufficient Screening: The company failed to implement sufficiently rigorous screening measures for restricted destinations and end-users, even while continuing exports to Russia, a known high-risk destination.
Lack of Oversight on Third Parties: Integra relied heavily on third-party distributors and freight forwarders without adequate oversight to mitigate diversion risks and ensure full compliance with U.S. export control laws.
A robust compliance program must adapt to regulatory changes and emerging risks, incorporating comprehensive measures such as enhanced training, thorough due diligence, and proactive monitoring of new restrictions.
U.S. Export Controls as Geopolitical Tools
Since the onset of the Russia-Ukraine war, the U.S. has increasingly leveraged export controls to curb Russia’s access to dual-use technologies supporting its military. This case reflects a broader trend of using trade restrictions as a tool to advance national security and foreign policy objectives.
Response and Settlement
Upon recognizing the compliance lapses in October 2023, Integra stopped shipments to Russian end-users and filed a Voluntary Self-Disclosure (VSD) with BIS. The company’s proactive disclosure and extensive cooperation were significant mitigating factors throughout the investigation.
BIS imposed a $3.3 million civil penalty, but $1.5 million was suspended and could be waived if Integra adhered to settlement terms and timely paid the remaining $1.8 million in installments. The penalty reduction acknowledged Integra’s VSD and collaboration, aligning with BIS’s penalty guidelines, which incentivize voluntary disclosures.
This resolution highlights BIS’s emphasis on the importance of maintaining up-to-date compliance practices, particularly when operating in sanctioned regions. As emphasized in a press release from the Office of Export Enforcement, companies exporting to sanctioned regions are "expected to closely track and update controls." Integra’s case serves as a cautionary tale about the risks of noncompliance and the benefits of proactive engagement with regulators.
Insights and Takeaways
This enforcement action underscores the critical importance of:
Monitoring Regulatory Changes: Companies must stay attuned to evolving export control regulations and adapt their compliance programs accordingly.
Proactive Disclosures: Filing a VSD and cooperating with investigations can significantly mitigate penalties.
End-User and Supply Chain Due Diligence: Robust screening and oversight of distributors, freight forwarders, and other partners are essential to ensuring compliance.
Integra’s case illustrates how adherence to compliance best practices and prompt corrective actions can mitigate the consequences of violations. However, the financial and reputational costs of noncompliance remain substantial, reinforcing the necessity of vigilance in today’s increasingly complex regulatory landscape.
Disclaimer: The views expressed here are solely my own and do not represent the positions of my employer. They do not constitute legal advice nor create an attorney–client relationship.