Ohio Instruments Company Implicated in Entity List Penalty

The Bureau of Industry and Security (BIS) announced a settlement with Keithley Instruments International Corporation (“Keithley International”) on a proposed charge of “Evasion.” The settlement required the company to pay a $125,000 civil penalty. Keithley’s U.S. parent company is based in Ohio.

According to the Order and Settlement Agreement, in early 2003 Keithley International and its manager at the time worked with Rajaram Engineering of Bangalore, India to export electronic instruments to Vikram Sarabhai Space Center (“VSSC”) without required export licenses. VSSC is an Indian Space Research Organization entity and designated on the “Entity List.” The products were classified under ECCN 3A992 and designated as EAR99.

The Order and Settlement Agreement provide some details on the activity that led to the proposed charge. According to BIS, Keithley International and its manager structured the sales so that VSSC would order the goods through Rajaram Engineering , so it would appear that Rajaram was the purchaser and end-user of Keithley’s U.S. parent company’s products, not VSSC. Apparently, Keithley International specifically instructed VSSC to place its orders in this way and not with Keithley Instruments, Inc., the U.S. parent company. The company’s manager even went so far as to explain to Rajaram’s owner and manager that structuring the orders in this way would avoid the export licensing requirements because VSSC would not appear in the transactions as the end-user. When Rajaram inquired about becoming a licensed distributor of the U.S. parent company’s products, it was told that it could not because that would “require export licenses to be obtained for items destined for Indian listed entities.” Instead, Keithley International’s manager advised Rajaram to continue to do business as it was structured.

The Order shows that the U.S. parent company and its Indian subsidiary had clear knowledge that VSSC was on the Entity List and, therefore, export licenses would be required. Apparently the company chose to sell through a third-party, rather than apply for export licenses that would have been reviewed on a case-by-case basis. The Order does not provide information about how many sales were involved or completed or the value of those sales. This was not a voluntary self-disclosure case and the settlement agreement does not include an export compliance audit requirement; so presumably, the company simply chose to not follow their export compliance practices here. Maybe the cost of doing business this way was “worth it” in the short term, but the long-arm of BIS caught the company this time. Likely, the company’s export compliance is more robust today than it was in 2003.