Company Fined $100,000 for Export Violation Involving H-1B Employee

Microwave Engineering Corp., a Massachusetts-based microwave components company, has agreed to pay a $100,000 penalty to the U.S. Department of State’s Directorate of Defense Trade Controls (DDTC) for allowing an H-1B employee from China access to controlled technical data, a violation of the Arms Export Control Act and the International Traffic in Arms Regulations (ITAR). The DDTC controls the export and temporary import of defense articles and defense services covered by the United States Munitions List. The list includes not only firearms, ammunition or other articles one would typically associate with defense, but also technical data. The U.S. Department of Commerce also regulates the release of controlled technology or technical data under the Export Administration Regulations (EAR). The EAR regulates the export of "dual-use" items, including goods and related technology that are designed for commercial use, but could have military applications. Both the ITAR and EAR aim to support U.S. national security and foreign policy objectives, and their restrictions on release of certain technology or technical data are incorporated into the process of obtaining nonimmigrant work visas.

When employers sponsor foreign nationals for U.S. employment visas under the H-1B, H-1B1 Chile/Singapore, L-1 or O-1A categories, they must confirm in the petition itself that they have assessed the applicability of the ITAR and EAR restrictions on releasing technology or technical data to the prospective foreign national employee. Employers must also confirm whether they have determined that a license to release the technology or technical data to the employee is not required from the U.S. Department of State and/or the U.S. Department of Commerce, or that a license is required to release the technology or technical data, and the employer will therefore prevent access to the information until and unless the employer receives the required license or other authorization.

In the Microwave Engineering Corp. case, the company had maintained a technology control plan where no foreign person was to be given access to classified material or unclassified information that involved the disclosure of technical data. They employed the Chinese national as a research scientist from September 2009 to September 2011 and reportedly briefed both the research scientist and the supervisor on the work restrictions. Nonetheless, according to the DDTC, the company’s president and another engineer provided the employee with controlled technical data on multiple occasions without first obtaining the necessary license. In issuing the $100,000 penalty, the DDTC acknowledged that it took into consideration the fact that Microwave Engineering Corp. voluntarily disclosed the violation in 2012 and has since taken steps to improve its compliance program. Otherwise, more severe penalties could have been pursued. The case is a reminder of the importance of ITAR and EAR compliance for employers with foreign workers in the H-1B, H-1B1 Chile/Singapore, L-1 or O-1A visa categories.