BIS Fines Defense Exporter Caught Misusing License Exception STA

The Bureau of Industry and Security fined First Call International, a Texas-based provider of defense and aerospace items, after the company modified a document to make it appear like it was complying with U.S. export control regulations. BIS also said the business illegally exported military aircraft parts to Malaysia and South Korea.

BIS fined First Call $439,992, but it suspended most of the penalty “due to the company’s financial condition.” Under a settlement, First Call agreed to pay BIS $75,000 and give its employees export control compliance training during a one-year probationary period. It also admitted to committing the violations.

“BIS will not tolerate exporters undermining the integrity of our export control system through the submission of false or misleading information,” said Matthew Axelrod, assistant secretary for export enforcement. “Today’s enforcement action once again highlights the need for companies who do business abroad to have robust training efforts and effective export compliance programs.”

The violations mainly involved First Call’s failure to comply with License Exception Strategic Trade Authorization (STA), BIS said, which authorizes certain exports to trusted U.S. allies if the foreign importer makes several certifications through a “prior consignee statement,” including that they won’t reexport the item outside a list of STA eligible countries.

First Call exported the items on March 6, 2018, filing Electronic Export Information in the Automated Export System to describe a shipment of five “Secondary Flights Displays with integrated QRS-11 Gyrochip, Micromanaged Angular Rate Sensors,” or SFDs, to the U.K. The company in September 2018 amended its EEI filing for the SFDs -- which were classified under Export Control Classification Number 9A610.x and worth about $117,500 -- to clarify they had been exported under License Exception STA.

But BIS said those STA requirements “had not been met.” The agency said the original equipment manufacturer for the SFDs informed the BIS Munitions Control Division that First Call hadn’t provided it with the required prior consignee statement by the March 6, 2018, export. “[T]herefore it was false to cite License Exception STA as authorization on the September 24, 2018 amended EEI,” BIS said.

After a BIS compliance officer asked First Call for a copy of the prior consignee statement, the company provided a statement that was dated Jan. 1, 2018. The BIS officer believed the statement was “backdated and falsified in violation of the” Export Administration Regulations.

In response to an August 2020 subpoena, First Call admitted that it didn’t have the prior consignee statement when it submitted its EEI for the export, and said it “now understands that it unknowingly submitted false statements to BIS through the amended EEI filing,” according to the BIS enforcement order. It also admitted to asking the U.K. importer to back-date the statement to Jan. 1, 2018, even though it didn’t receive it until October 2018.

BIS said the company violated the EAR by making a “false or misleading representation, statement, or certification” involving an export, export control document or export-related report.

The order also said First Call violated the EAR on Jan, 8, 2020, when it exported about $35,925 worth of military aircraft parts and components without a license. The company sent the items -- classified under ECCN 9A610.x and controlled on national security grounds -- to Australia-based Flite Path Party Ltd. and claimed to have used License Exception STA. But the items were ineligible for the license exception because First Call “was aware at all pertinent times” that they were scheduled to be forwarded to the Royal Malaysian Air Force in Malaysia, a destination which is “ineligible” for License Exception STA.

The items included three F/A-18 Sensor Units, three F/A-18 Lap Assemblies and one F/A-18 Spool and Sleeve Assembly, BIS said. The purchase order stated that the items were for the “RMAF” -- the acronym for the Royal Malaysian Air Force.

First Call also violated U.S. export controls in July 2019 when it sent about $1,603.44 worth of controlled military aircraft parts and components to a South Korean helicopter maintenance facility without a license, BIS said. The item was a “bracket” controlled under ECCN 9A610.x, and it was destined to a facility working on maintenance for the South Korean Navy’s UH-1H helicopters. BIS said First Call admitted in a written statement in 2021 that it didn’t obtain a license for the export and the shipment didn’t meet the requirements for License Exception STA.

Along with the $75,000 fine, First Call agreed to “conduct export control compliance training for its relevant personnel and management” during the one-year BIS probationary period. The company must also certify to BIS in writing that it has completed that training. If the company doesn’t complete this training or doesn’t pay the fine, BIS said it may reinstate the remaining $364,992 portion of the penalty and revoke the company's export privileges for one year.

First Call didn’t immediately respond to a request for comment.