State Department Policy Change Looks to Separate Debarments, Export Bans

A State Department policy change that lifts statutory debarments on companies that have export privileges still banned is a practical step toward rewarding past violators who aren't yet ready for complete reinstatement, lawyers say. The policy change, announced in a March 4 notice, came as State lifted a debarment against Colorado-based Rocky Mountain Instrument Company (RMI) -- stemming from 2010 violations of the Arms Export Control Act -- without reinstating RMI’s export privileges.

In the past, export bans and statutory debarments, which prohibit companies from directly or indirectly exporting defense products, could not be lifted without the other also being lifted. The policy change, lawyers say, allows State to lessen restrictions on U.S. companies with little risk to the U.S. government.

Trade lawyer Douglas Jacobson of Jacobson Burton said the move makes sense. It allows violators to conduct business in the U.S. while still being banned from selling to foreign countries and entities, he said. “This is a positive,” Jacobson said. “There’s a recognition that the export privileges and the debarment should be de-linked.”

The move shows State is “willing to take a more pragmatic approach” and “gets away from an all or nothing mentality,” said Sandler Travis lawyer Kristine Pirnia. Pirnia said the policy change permits “more trusted exporters” to buy RMI’s products and export the goods themselves, allowing RMI to continue operating only domestically. “It’s sort of like a baby step for State,” Pirnia said in an email. “It also is a good way to reward a company like RMI for improving its compliance but with a recognition that RMI isn’t fully to be trusted yet.” Jacobson said the move isn’t surprising, but more of a “practical reality. Exporting and domestic fields are completely different, and State should not have any authority over domestic.”

RMI pleaded guilty to violating the AECA in 2010, State said in the notice. RMI paid a $1 million settlement to the U.S. that year after the Department of Justice announced in a press release the company violated the False Claims Act and exported “sensitive” defense articles without a license, some of which was later found in Iraq and Afghanistan. According to the 2010 release, RMI manufactured “optical components used in laser and imaging applications.” In its notice, State said it then banned RMI from exporting defense articles, data or services that require a license. But after conducting a “thorough review” of RMI’s conviction, State said the company “has taken appropriate steps to address the causes of the violations to warrant rescission of the notice of statutory debarment.” State added that “the national security and foreign policy interests of the United States are not advanced by maintaining the” debarment.

State will only issue export licenses to RMI on a case-by-case basis after “interagency consultations,” a review of RMI’s 2010 conviction, the agency said, and “a finding that appropriate steps have been taken to mitigate any law enforcement concerns.”