Company X: Voluntary Disclosure Letter for Export Regulation Violation

This assignment presents a voluntary self-disclosure (VSD) letter drafted to the BIS Office of Export Enforcement, addressing a violation of export regulations. The letter details how Company X, based in Los Angeles, discovered through an internal review that it had incorrectly classified and exported horizontal stabilizer assemblies for military aircraft to distributors in Germany and Japan. Instead of classifying the parts as 9A610.x, requiring a license, they were classified as 9A991.d, allowing export under NLR (No License Required). The letter acknowledges the error, explains the immediate notification to customers, and outlines the company's commitment to compliance, including plans for future license applications and cooperation with any investigation. The letter references relevant regulations, including the EAR and its penalty guidelines, and expresses regret for the violation while highlighting steps taken to prevent future occurrences. The assignment underscores the importance of accurate classification and adherence to export control laws.

Name:
Institution:
Date:

The purpose of this letter is to inform the bureau of industry and security of the potential
violation of the export rule and regulations that are in place under the export administrative
regulations.1 The act of violation was an unwilling act during the course of operations and
resulted from human error. The purported violation took place at the offices for processing
export documents where there was a wrong classification of the export goods which could have
potentially led to the state losing out on revenue from unpaid duty taxes. We therefore find it
advisable to inform you of the same
We are a company that deals with export of military parts to various countries across the world
and we have been in operation for quite a number of years. In our normal business undertakings,
we received orders for horizontal stabilizer assemblies for military aircraft in Japan and
Germany. We therefore proceeded to process the order as it’s the usual case and keep them ready
for export. However it is during the classification part that a mistake happened which has led to
the violation of the export rules and regulations. Normally, several goods are classified
differently and their relevant numbers are clearly marked for export purposes. The goods are
usually classified according to the purpose of its use or according to who the end consumer of
the product will be. 2According to the export administrative regulations, the classification of
items such as this for military purpose is based on whether the product is going to be sold again
or whether it is going directly to an end user. Such end users may include goods to an embargoed
country.in the classification process the gods are given special codes that are to be used in
identifying them for purposes of obtaining export licenses. The goods that are to be consumed by
a final consumer are usually labeled NLR which is to indicate that no license is required in
processing the goods for export. For those goods that are to be used for business purpose, the
owners are required to obtain proper licenses from the bureau of industry and security.
Therefore in our case, the classification of our export goods had a problem. The goods that were
to be exported to both Japan and Germany were for business and were going to be sold to other
people in those countries. Thus, they were supposed to be classified as 9A610x which is the
specific code for military parts that are to be exported and be further sold to a different person
based on the provisions of section 768.4 of the export administrative regulations. This was not
the case as they were instead marked as 9A991d which is totally wrong. The mentioned code is
only for parts that are intended for final use according to the country’s rules and regulations and
which don’t require one to obtain license for export.3
In view of this it is important for us to acknowledge that a mistake happened on our side. We are
also aware that by the classification process of the goods being wrong, we were not able to
obtain any license which in turn would mean that we have clearly avoided paying the required
duty that is expected of us in the export business. Failure to pay duty on our part has a huge
impact as t denies the government the much needed revenue that would enable it to carry out
development activities in the country.4 It is our duty as a company to pay taxes as we are fully
1 Arms export control act of 1976
2 Anti-boycott Act of 2018
3 Bureau of industry and security regulations
4 Export licenses regulations

aware of the benefits of the same. Also the company recognizes the fact that it is criminal for one
to avoid paying taxes either willingly or unwillingly and the harsh penalties that come with it.
According to the penalties laid down in the administrative penalties supplement no 1 of section
766 of the export administrative regulations, the company may be handed a huge fine for such a
violation ,loose its license or even in the worst case scenario, the directors of the company may
be arrested and criminal proceedings instituted against them. This are issues that we would not
like to go through as a company and thus there was need to inform you of the happenings so that
you can as well investigate and confirm that what we are alleging is indeed true and that the
avoidance of duty was just but a case of human mistake.
It is important to note that we normally do a routine review of our export sales and it is this
check that brought the issue to light. This could not happen if we did not have a strong and
efficient review system in place and it also goes a long way to show that we are indeed
committed to fulfilling our obligations of paying our taxes. Also, once we were able to detect the
anomaly, we immediately dispatched the information to our customers in the hope that they
would still have the products intact and for them to ship back the goods. Unfortunately this was
not the case as they had already sold half of the goods and therefore only half of it was
remaining. 5The only way that the customers could help us in salvaging the situation was by
returning the half that was there in order for the right classification to be done and all the relevant
licenses to be obtained before they can be shipped again.as a company, we recognize the fact that
for the goods already sold, we will not be able to recover the lost revenue in terms of taxes
avoidance and it is our wish that we sit down and try to find an amicable solution to it.6
Having pointed out the various reasons as to why we feel that a violation of the riles and
regulations governing export has been committed, it is important that he company is not only
seen to be laying blame partly on one part of its operations but for the mistake to be viewed as
one for the company as a whole.7 As earlier mentioned above the company understand the
serious implications that the violation may bring forthwith not only to the company but also to
the several workers that depend on it and the community at large. The company highly regrets
that this matter could not be detected as early as possible as it would have minimized the level
of violation.in view of this the company has undertaken strict measures that would ensure that
there is a reliable and efficient verification of the classification process to ensure that high levels
of accuracy are observed in the process. There will be double counterchecking of all the codes to
ensure that no single one is marked wrongly thereby reducing the chances of violation of the law.
During all this years that we have been in existence, we have strived to ensure that we abide by
the rules and regulations governing the export of goods and at no single time have we been in
5 Export control act reform of 2018
6 Executive order 11958
7 Export administrative regulations

violation of the regulations. 8Therefore this is an isolated case that is highly regrettable and we
promise to be extra vigilant to ensure that no such mistakes occur in the future.
The company would also like to state here categorically that we have plans to submit all the
relevant export licenses going forward. We are going to ensure that all future shipments are
thoroughly checked and the relevant export documents obtained. This would be done in
accordance with the guidelines provided for in the export rules and regulations and that all the
necessary steps will be followed in order to give the process a clean bill of health.9
The company would like to invite you the bureau of industry and security to conduct an
independent investigation of whether or not an export violation has been committed and to avail
the findings to us.as a company that is dedicated to the economic growth of the country and one
that has nothing to hide, we are ready to provide you with all relevant source of materials or
documents that will be of assistance to you in regards to this matter. We will also be available for
any interview if you so wish. The company is also ready and willing to accept the findings of
your investigation and the relevant recommendations that will be proposed including fines or
other punitive measures that will be proposed in view of the violation.it is our prayer that speedy
investigation is done in order for us to move past this. 10We are a company that has a high
reputation and thus would not like to be listed among several companies that are well known for
being notorious when it comes to the issue of paying their relevant taxes.
For any questions regarding this initial notification, you can contact the company’s export
manager who has a lot of experience in handling export matters and thus I believe would be of
much assistance to you as you prepare yourself to carry out this investigation. Any further
queries can be directed to the directors if need be.
Yours faithfully
Mr X
Attorney
References
Arms export control act of 1976
8 Export administrative act 1979
9 Executive order 13026
10 Foreign trade regulations

Anti-boycott Act of 2018
Bureau of industry and security regulations
Export licenses regulations
Export control act reform of 2018
Executive order 11958
Export administrative regulations
Export administrative act 1979
Executive order 13026
Foreign trade regulations