BIS Fines Software Company for False Statements in Support of CJ Request

The Bureau of Industry and Security fined a U.S. thermal imaging camera producer more than $300,000 after it violated the Export Administration Regulations by providing false and incomplete statements in support of a commodity jurisdiction (CJ) request (see 2103040065). The company, FLIR Systems, sought a determination that one of its newly developed products was subject to the EAR rather than the State Department’s International Traffic in Arms Regulations and withheld information in order to support that determination, BIS said. Along with the fine, FLIR agreed to conduct two BIS-monitored internal audits and won’t be granted export licenses until the audits are completed and the fine is paid, BIS said in an April 29 notice.

The enforcement action “demonstrates the serious nature and consequences of such behavior,” Kevin Kurland, BIS’s acting assistant secretary for export enforcement, said in a statement. “BIS will not tolerate exporters that provide inaccurate or incomplete representations related to export regulations and laws.”

The company provided the government with inaccurate statements between 2012 and 2013, when it sought a CJ request for its newly developed “Uncooled Focal Plane Array” (UFPA), BIS said. At the time, the government “expressed concerns” that the UFPA could be used for concerning end-uses, but FLIR said the UFPA was “designed specifically” for commercial smartphones and would work to “prevent its diversion” to other uses. Despite these statements, BIS said the company “internally contemplated other markets for its product,” created plans for military applications involving reconnaissance drones and sold the UFPAs to a Norwegian customer in the defense industry.

FLIR also “repeatedly” told government officials that it had developed a new and “innovative anti-tamper system” known as a “handshake requirement,” which would protect the UFPAs against diversion to concerning military end-uses. The company told BIS that the UFPA by itself was “effectively useless” because of the anti-tamper “protection features,” which allowed the UFPA to only “operate in conditions defined by FLIR thermal camera hardware.”

But FLIR hadn’t yet developed the anti-tampering feature even though it suggested to government officials that it had, BIS said. The company “never actually successfully developed nor added such anti-tamper protections as a feature of the UFPA,” BIS said. The agency added that FLIR knew the UFPAs would be “inserted into products other than smartphones” because that was part of its internal business and manufacturing strategy, which included plans for military applications. BIS said FLIR didn’t disclose those plans in its CJ request.

FLIR systems submitted a voluntary self-disclosure several years after the State Department determined that the UFPA was subject to the Commerce Department’s jurisdiction, BIS said. The government “upheld” that jurisdiction determination in 2018 “despite continued concerns about the original presentations by FLIR," BIS said.

As part of a settlement agreement with BIS, FLIR agreed to complete two internal audits of its export controls compliance program over the course of two years. The results of the audits must be reported to BIS and must “be in substantial compliance” with the agency’s Export Compliance Program sample audit module and include a “comprehensive assessment” of FLIR’s compliance with the EAR. A FLIR spokesperson didn’t comment.