INTERTURBINE AVIATION LOGISTICS GmbH (IAL) [Consent Agreement (CA) Date: 010710]

United States Department of State (DOS) - Settlement Summary (As of 043010)

Trade compliance professionals are encouraged to read all the available related documents at www.pmddtc.state.gov/compliance/consent_agreements/InterturbineAviation.html.

Counts

Charges Monetary Fines

Mandated Action Plan Highlights Actual Remedial

General 1 2

3-4 5 6 7

Seven alleged violations by IAL, Germany and its Texas branch office, IAL, LLC for unauthorized exports of International Traffic in Arms Regulations (ITAR) controlled heat resistant protective coating/sealant. - Unauthorized exports to Germany, USML

Category IV(f) Significant Military Equipment (SME) without appropriate Directorate of Defense Trade Controls (DDTC) authorization

- Misrepresentation and omission of facts on an export control document for the purpose of exporting a defense article

- Willfully caused and permitted an unauthorized export when it conspired with IAL Texas and conspired and caused misrepresentations on an export control document

- Engaged in the export of a defense article without being registered with the DDTC

- Failed to obtain a Non-Transfer and Use Certificate for the export of SME

- Retransferred without DDTC authorization USML Category IV(f) SME to Bayern-Chemie (a German company)

$1,000,000

(Civil Penalty)

$900,000

- IAL will continue their compliance program through their Office of Export Compliance Management (OECM). IAL’s OECM will provide oversight and support, respectively, in all divisions for all matters involving compliance with US export laws and regulations consistent with IAL’s existing export compliance control system.

- For the purpose of assessing compliance with the provisions of this CA, IAL agrees to arrange and facilitate with minimum notice, on-site reviews by the Department while this CA remains in effect.

- IAL shall retain an outside consultant with expertise in Arms Export Control Act/ITAR matters, approved by the DDTC, to conduct an audit of their export control system (ECS). It will assess the overall effectiveness of IAL’s Export Control Classification Number/ITAR automated ECS to ensure IAL ‘s policy not to export or broker ITAR controlled articles is effective and all ITAR controlled articles are readily identifiable and prevented from being exported or brokered.

- Within 12 months of the CA, the audit will be completed and a written report containing recommendations for improvements with respect to IAL’s export control systems will be submitted to the Director, DDTC along with IAL’s plan on how they will address those recommendations.

- Three months prior to the 2-year anniversary of the CA, IAL shall submit to DDTC’s Director written certification that all aspects of the CA have been implemented including any audit recommendations.

NOTABLE QUOTES: “However, given that the Respondent’s disclosed the violations only after a violation was detected by the Government and the national security interests involved, the Department has decided to charge the Respondents….” (See, Proposed Charging Letter, Page 2, Paragraph 2, Sentence 2) “…Respondents did, through actions of their officers, agents and employees, knowingly and willfully export a shipment of ITAR-controlled ablative material and sealant, categorized as SME, without obtaining a required Department (of State) export license.” (See, Proposed Charging Letter, Page 2, Paragraph 4, Sentence 1) “…Interturbine Germany’s Vice President for Business Development, in a further effort to conceal the unauthorized transaction, deleted the computerized Interturbine delivery note….” (See, Proposed Charging Letter, Page 5, Paragraph 3, Sentence 1) “The employees who violated company policies, as well as applicable laws, were administratively sanctioned by IAL.” (See, Proposed Charging Letter, Page 6, Paragraph 4, Sentence 2) IAL DOS PRIOR SETTLEMENT HISTORY: None (Also note, IAL has no settlement history with the US Department of Commerce, Bureau of Industry & Security). OTHER FACTS: Similar to the DOS Air Shunt Instruments, Inc. CA, in 2009, no Senior/Special Compliance Officer (SCO) was directed as part of this settlement. * Regarding the suspended monetary fines, should the Respondents decide to seek reinstatement and renew their DDTC registration during the 2-year term of the CA, Respondents will apply $400,000 to RMC agreed to by the DDTC. (See, CA, Page 4, Paragraph 3, Sentence 1) IMPRESSIONS: This action continues the trend started in 2008 toward a more level playing field and going after organizations of all sizes, especially so in cases involving willful or knowing violations and harm to national security. ALSO NOTE: Historically, monetary fines in cases like this are relatively small in comparison to settlements with larger companies. The goal appears to be not putting companies like IAL out of business, but to clearly deliver the mandate for compliance and ensure a corrective action plan is in place. Sources also indicate closing out such issues with small companies is also easier for a variety of reasons.

The actual fine amount paid was $100,000.

* $400,000 in Remedial Compliance Measures (RCM) is suspended if IAL does not seek reinstatement of their

registration or enter into any ITAR transactions for the

2-year term of the CA.

The other $500,000 is suspended on condition that IAL has already implemented

pre-CA RMC.

The total fine of $1,000,000 equates to $142,857.14

per alleged violation.

The actual civil penalty is about 14.3% of the maximum

of $7,000,000 that could have been imposed for

7 criminal violations.

There are no restrictions on distribution of this Settlement Summary exactly as is with complete/proper citation/attribution.

For changes, inputs, suggestions, please contact John Priecko at 703-895-1110 or jpriecko@comcast.net. Trade Compliance Solutions