The U.S. Bureau of Industry and Security (BIS) has administered a fine of $497,000 to Vorago Technologies Inc., in regard to apparent violations of the U.S. export control regulation: U.S. Commerce Control List (USCCL) and the Code of Federal Regulations (CFR): 764.2 (d) - engaging in prohibited conduct. From 2014 to 2019, Vorago, an Austin-based company, exported radiation hardened semiconductor (SRAM) wafers to a company located in Bulgaria, who then re-exported the items to Cosmos Complect, a Russian engineering company specializing in assembling electrical components for the aerospace and mining industry.

Starting in 2014, Vorago agreed a purchase order with Bulgarian based Multi Technology Integration Group (MTGI), exporting 'radiation hardened 16Mb static random-access memory (SRAM) wafers' on six separate occasions. MTGI was in fact a front company for Cosmos Complect, who were using the workshops in Bulgaria as a way to avoid sanctions and export violation penalties. The specific SRAM wafers being exported were controlled items under the USCCL export control classification number 9A515 and would therefore require an export license to ship from the United States to Russia. Vorago were aware that exporting any electrical components to Russia would be denied following the implementation of sanctions after the Russian Federation's annexation of Crimea in 2014. After initially questioning the validity of MTGI as a business and their use of the controlled item, Vorago understood the end user would in fact be Cosmos, and they would repurpose the SRAM wafers for use in Russian manufactured aerospace and mining equipment. Vorago knowingly continued the illicit trading activity for five years agreeing to provide up to $1m worth of SRAM wafers, and met with Russian employees on several occasions to discuss the possibility of more frequent transactions.

In September 2021, the U.S. BIS imposed a civil penalty of $497,000, agreeing $247,000 would be suspended until September 2023 if Vorago agreed not to commit any new violations and suspend all business relating to exports and re-exports of controlled items for the duration of two years. The U.S. BIS were also able to indict the individuals involved from Russia and Belarus as they violated the Export Control Reform Act (ECRA), with a maximum penalty being 20 years imprisonment upon conviction.

Once again, the U.S. BIS showed their prowess in identifying and swiftly fining manufacturers engaged in illicit trading activity. The U.S. BIS emphasizes the importance of understanding the end-use and end-user of goods, specifically on goods for re-export requiring a license and especially if the final destination is to a country that has a sanctioned status. Within the USCCL, a 'reason for control' is applied to each item with an associated country chart detailing which import country requires a license. It is important to remain compliant with export control regulations, to ensure regulators and enforcement agencies do not have a reason to impose penalty fines.

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Posted 01 November 2021 by Ravi Amin, Trade Compliance Subject Matter Expert, Maritime, Trade & Supply Chain, S&P Global Market Intelligence