Additive manufacturer 3D Systems agreed to pay $12,777,750, engage a consultant and complete compliance audits to settle allegations of violations of Export Administration Regulations (EAR) and International Traffic in Arms Regulations (ITAR) by exporting controlled aerospace technology and metal alloy powder to China without the required license, and by exporting controlled technology to Germany without the required license, as well as failing to comply with EAR and ITAR recordkeeping requirements.
“Today’s enforcement action highlights a troubling trend of U.S. companies offshoring 3D printing operations and ignoring the export controls on the technical data sent overseas to facilitate the 3D printing,” said OEE Director John Sonderman. “The enforcement action would not have been possible without a defense contractor coming forward when they noticed that a price quotation indicated that the quoted parts were to be manufactured in Asia using controlled technology.
Last June, BIS issued a Temporary Denial Order barring North Carolina based Rapid Cut and affiliates for similar behavior.
During the time period at issue, 3D Systems provided 3D printing, cast urethane modeling, and injection molding services to customers across the United States and abroad. While 3D Systems maintained its own manufacturing facilities in the United States, it also regularly e-mailed design documents, blueprints, and technical specifications to its then-subsidiary Quickparts office in China to generate a price quote for On Demand Manufacturing (ODM). The e-mails, which included controlled U.S. technology, constitute an export of technology subject to the EAR.
On several occasions, and unbeknownst to the U.S. companies that requested the price quotes, 3D Systems e-mailed controlled design drawings, including those for military electronics as well as those used in the development, production, operation, or repair of spacecraft, to its then-subsidiary’s office in Guangzhou City, China. 3D Systems also exported controlled design documents to Germany, where 3D Systems maintained a mirrored server to store employee e-mails containing controlled technology.
In addition to unlicensed exports via e-mail, 3D Systems also exported metal alloy powder, which is controlled for national security and nuclear nonproliferation reasons, to China without the required BIS license.
In 2015, a Quickparts customer notified Quickparts of potential violations of the Regulations in connection with the export of technology subject to the Regulations to China. The customer also informed Quickparts that it had submitted a disclosure to the United States Government regarding such potential violations.
Eighteen months later, in connection with the disclosure, a BIS Special Agent conducted an outreach with 3D Systems’ then-Director of Operations and Special Projects. In April 2017, BIS issued a Warning Letter to 3D Systems regarding the conduct described in the disclosure.
3D Systems therefore knew or had reason to know that the technology it handled regularly as part of its ODM business unit was subject to the Regulations and likely required BIS licenses prior to its release to most countries, including China.
However, despite the outreach and explanation by a BIS Special Agent of the Company’s export control compliance obligations under the Regulations, 3D Systems failed to seek or obtain a license for such technology before exporting it. Other violations cited by DDTC included unauthorized reexports of technical data to Taiwan and unauthorized exports of technical data to foreign-person employees
The Company has been undertaking corrective actions to address this historic conduct by expanding the scope of its internal investigation to cover exports of technical data; implementing remedial compliance measures; selling its business unit primarily responsible for ITAR activity; and signing a statute of limitations agreement tolling the statutory period. For these reasons, the Department has determined at this time that it is not appropriate to administratively debar 3D Systems Corporation.
3D Systems spun off its On Demand Manufacturing business to the buyout group Trilantic in 2019.
DTCC Consent Agreement [link]
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