Latest Published US Department of State Export Control Settlement Highlights the Importance of Voluntary Disclosures in Resolving Enforcement Actions

Last month, the US Department of State announced a settlement with BAE Systems, Inc. (BAE), resolving more than 100 violations of the Arms Export Control Act (AECA) and the International Traffic in Arms Regulations (ITAR), 22 C.F.R. §§ 120-130. The settlement followed an extensive investigation by the Department of State’s Office of Defense Trade Controls Compliance (DDTC) after BAE voluntarily disclosed numerous categories of export control violations arising from activities that occurred between May 2019 and March 2025.

According to the charging letter, the ITAR violations included the following:

• Exporting, without authorization, technical data relating to printed wiring boards for use in Global Positioning System (GPS) receivers controlled by United States Munitions List (USML) Category XI(c)(2), to a manufacturer located in the People’s Republic of China.
• Exporting, without authorization, dozens of files containing technical data relating to printed wiring boards (PWBs), controlled under USML Category XI(c)(2), for integration into military GPS systems, to Canada.
• Furnishing, without authorization, defense services in more than 17 instances, including site acceptance testing, maintenance, and operational consulting on Range Instrumentation Radars (RIRs) and Electro-Optical Tracking Systems controlled under USML Category XI(a)(3)(iv), in Italy and France.
• Exporting, without authorization, a commodity controlled under USML Category XIX(e) after mistakenly treating the commodity as subject to the Export Administration Regulations (EAR) and shipping it without the required ITAR license.
• Retransferring, without authorization, technical data identified as USML Category VIII(i).
• Numerous violations of terms, conditions, and provisos of agreements, including Technical Assistance Agreements (TAA), Manufacturing Licensing Agreements (MLA), and other export control licenses.

Under the terms of the consent agreement, BAE is required to pay a civil penalty of $36 million, with half of that penalty suspended on the condition that the suspended amount be used for remedial compliance measures and to strengthen BAE’s export control compliance program. BAE is also required to engage a monitor to oversee the consent agreement for at least two years and will be subject to one external audit of its ITAR compliance program.

Although the penalty was significant, it is important to note both the severity of the violations—the charging letter identified 104 individual export control violations—and the role that BAE’s voluntary disclosures, cooperation, and self-initiated remediation measures played in helping the company avoid more stringent sanctions. As the State Department noted in the charging letter: “The Department notes that had the Department not taken into consideration these mitigating factors, it would have charged Respondent with additional violations or proposed a higher penalty.”

As a reminder, the ITAR mandates disclosure of certain types of violations, including certain cases involving: (1) countries listed in ITAR § 126.1 (see ITAR §§ 126.1(e)(2), 126.16(h)(8), and 126.17(h)(8)); and (2) unreturned temporary exports of personal protective gear (see ITAR § 123.17(j)). Failure to disclose a mandatory disclosure matter may itself constitute a violation of the ITAR. For all other types of suspected violations, companies are strongly encouraged to submit a voluntary disclosure pursuant to ITAR § 127.12. Under the regulation, DDTC may consider a voluntary disclosure as a mitigating factor in determining the administrative penalty, if any, that should be imposed. Conversely, failure to disclose a violation may be treated as an adverse factor in determining the appropriate disposition of the violation.

Accordingly, in addition to establishing a robust compliance framework capable of managing exports, technical data transfers, and multiple types of export control licenses, the key takeaway from the settlement agreement is that when a company becomes aware of a potential violation, a timely and well-managed voluntary self-disclosure—where appropriate after investigation and legal analysis—often provides the strongest path toward a more favorable resolution. To minimize administrative penalties, companies should establish clear reporting mechanisms, promptly investigate potential violations, and be prepared to engage counsel quickly to navigate any voluntary disclosures and subsequent agency investigation.

Butzel routinely assists clients in mitigating export control risk by developing and implementing compliance programs, conducting internal investigations into potential violations, and advising on voluntary and mandatory disclosures to the appropriate regulatory agencies.

For more information, please contact the authors of this Client Alert or your Butzel attorney.

Derek Mullins
313.983.6944
mullins@butzel.com

Beth Gotthelf
248.258.1303
gotthelf@butzel.com

Anthony Scalise
248.258.2612
scalise@butzel.com

Jennifer M. Smith-Veluz
202.454.2885
smithveluz@butzel.com