DDTC Fines California Company $6.6 Million for ITAR Export Violations

A California electronics company was fined $6.6 million by the State Department’s Directorate of Defense Trade Controls after it illegally exported technical data and software to more than 15 countries, including China, DDTC said Aug. 9. DDTC said Keysight Technologies, which makes electronic test and measurement equipment and software, committed 24 violations of the International Traffic in Arms Regulations, including unauthorized exports while the companies still had an outstanding commodity jurisdiction request pending with the State Department.

DDTC said the company illegally exported its Signal Studio for Multi-Emitter Scenario Generation (MESG) software to China, Russia, Japan, Israel and Canada despite just submitting a commodity jurisdiction request a few weeks prior. Keysight Technologies had exported the goods between 2015 and 2018 as “full versions installed on hardware or electronically” and exported trial versions of the software “via downloads from their website.”

The company told DDTC the exports were “based on a good faith but misguided belief” that the MESG software wasn’t subject to ITAR controls, DDTC said. The company stopped the unlicensed exports once it learned of DDTC’s formal commodity jurisdiction determination, which classified the software under U.S. Munitions List Category XI.

Soon after, Keysight Technologies submitted an initial disclosure that said the MESG software should have been classified under the Export Administration Regulations as EAR99, adding that it “believed the ITAR jurisdiction was in error," DDTC said. The company submitted a reconsideration request to DDTC, but the agency “reaffirmed” its decision that the software was controlled under the USML.

DDTC said several aggravating factors contributed to the penalty, including the fact that some of Keysight’s exports were sent to China, a proscribed destination in the ITAR, and Russia, which is subject to “restrictive measures on defense exports.” Others were sent to Australia, Canada, the Czech Republic, France, Germany, India, Israel, Japan, Singapore, South Korea, Spain, Switzerland, Taiwan, Turkey and the United Kingdom.

Other aggravating factors included that DDTC said it had “alerted” Keysight to its “misclassification concerns,” and that the company exported software while awaiting a pending commodity jurisdiction request.

Mitigating factors included the company’s cooperation with DDTC’s investigation, its willingness to sign a tolling agreement and its implementation of “remedial compliance measures.” Those measures include an internal review of its AECA and ITAR compliance program with a DDTC-approved official, who will oversee and monitor Keysight’s compliance for at least two years, according to a settlement agreement. The official can report to DDTC on Keysight’s activities and present “any export compliance-related issue” to the agency’s director. Keysight also agreed to improve compliance training and procedures, perform an audit, and “review and verify the export control jurisdiction of all hardware and software pertaining to” its “ITAR-regulated business activities.”

DDTC said it will suspend $2.5 million of the $6.6 million fine “on the condition” that the money is used toward the remedial compliance measures described in the settlement agreement. The agency said it didn’t impose a debarment against Keysight because the company “acknowledged the seriousness of the violations” and agreed to “significant additional remedial compliance actions.” But DDTC said the company must arrange future on-site reviews with agency officials.

Keysight Technologies said it is "committed to conducting business ethically" and has already taken "several" of the remedial compliance measures. "We take this matter seriously and are looking forward to working with the special compliance officer, as well as DDTC and the State Department, to continue to improve and enhance our ITAR compliance program," Senior Vice President Jeffrey Li said in a statement.

The DDTC penalty was the company’s second government-issued fine for trade violations within the last year. Keysight Technologies was fined $475,000 in September 2020 by the Treasury Department after its former Finnish subsidiary illegally exported test measurement equipment to Iran (see 2009240050).