On April 20, 2023, VTA Telecom Corporation ("VTA") entered into an administrative consent agreement with the U.S. Department of State's Directorate of Defense Trade Controls ("DDTC") to resolve six alleged violations of the Arms Export Control Act ("AECA") and the International Traffic in Arms Regulations ("ITAR") for unauthorized exports of defense articles and technical data to Vietnam.
VTA submitted a voluntary disclosure to DDTC in the wake of a federal law enforcement investigation for alleged criminal violations of U.S. export laws. Under the terms of the consent agreement, VTA will be administratively debarred for three years (on the basis that the violator cannot be relied upon to comply with the ITAR in the future), which prohibits VTA "from participating directly or indirectly in any activities that are subject to the ITAR."
The alleged violations relate to several types of unauthorized exports or attempted exports of ITAR defense articles, including Category XII(a) electro-optical imaging video trackers, Category IV(d)(7) hobby rocket motors, Category IV(h)(20) propellant kits for rocket motors, Category IV(h)(11) explosive bolts, and Category XIX(c) gas turbine engines. The agreement acknowledges that VTA neither admits nor denies the allegations.
Between June 2015 and July 2016, VTA disclosed six alleged violations of unauthorized export defense articles that were knowingly sent to Vietnam. Five of the items exported or attempted to be exported are controlled under the USML Category XII (a) and are designated as Significant Military Equipment ("SME"). SME defense articles warrant special export controls given their substantial military utility and capability. VTA misrepresented these unauthorized exports to the freight forwarder and undervalued them in export control documents.
The sixth alleged violation stemmed from an attempt to export thirty explosive bolts without authorization. Customs and Border Protection ("CBP") seized the bolts and discovered that VTA knowingly provided false statements on the intended use of the required end-use statement.
In addressing the penalty, DDTC considered several aggravating factors, including the unauthorized exports to Vietnam, VTA's failure to disclose the alleged violations until after a criminal investigation was underway, and the participation of VTA's personnel and senior management in the alleged violation as well as their disregard for the requirements of the ITAR.
Importantly, at the time of the alleged violations, Vietnam was a proscribed destination (i.e., a § 126.1 country). DDTC also stated that VTA was not registered as an exporter of defense articles as required under the ITAR. Nevertheless, DDTC also considered mitigating factors such as VTA's cooperation with the investigation and the submission of the VSD.
This was not the first time VTA engaged in unauthorized exports to Vietnam. On October 12, 2021, the U.S. Commerce Department Bureau of Industry and Security ("BIS") imposed a civil penalty of $1,869,372 million against VTA for the unauthorized export of controlled commodities to Vietnam. Over the following two years, VTA committed violations of the Export Administration Regulations ("EAR") by exporting items controlled for national security reasons without a BIS license, providing false statements to the government, and acting with knowledge. In addition to the civil penalty, VTA agreed at the time to fund an internal export compliance program and hire a Director of Trade Compliance to oversee VTA's export activities for at least two years.
The VTA consent agreement provides numerous lessons to the export community for improving compliance. Companies should conduct export audits and provide adequate training and resources to personnel. In addition, if errors are discovered, VSDs should be considered, as failures to disclose will be considered an aggravating factor.
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