Export Regulations Reach Foreign Subsidiary Employees

April 2007

This month the Bureau of Industry and Security (BIS) entered into a settlement with a UK citizen employed by a U.S. company’s UK subsidiary over charges he re-exported specialized software to Iran in violation of the Export Administration Regulations (EAR). 

The charges related to a single re-export of a U.S.-origin system containing specialized, encrypted software from the UK to Iran, without a license from the Office of Foreign Asset Control (OFAC).  The second charge involved re-exporting with knowledge that a violation of the EAR would occur.  The Order specifically states that the respondent, Stephen Lincoln, received instructions in 2002 from his employer’s parent company in the U.S. that the software could not be sold to Iran from any company locations and that doing so was a violation of U.S. law.

As a result of the settlement, Mr. Lincoln is barred for 7 years from participating, directly or indirectly, in any transactions involving commodities, software or technology exported from the U.S. that is subject to the EAR, including applying for an export license, negotiating, buying, selling, shipping or financing any sales or benefiting in any other way from such transactions.  He is now on the Denied Persons List (DPL). 

The settlement has been criticized as overreaching by BIS and notably the company was not penalized, criminally or civilly.  Nonetheless, the case importantly demonstrates the need for companies to educate employees and representatives abroad, monitor activities of their foreign subsidiaries diligently, and take affirmative steps to avoid potential re-export violations of controlled products, software and technology.