Notice2022-12826
Quicksilver Manufacturing, Inc., 8209 Market St. #A173, Wilmington, NC 28411; Rapid Cut LLC, 8209 Market St. #A173, Wilmington, NC 28411; U.S. Prototype, Inc., 8209 Market St. #A173, Wilmington, NC 28411; Order Temporarily Denying Export Privileges
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
June 15, 2022
Issuing agencies
Commerce DepartmentIndustry and Security Bureau
Full Text
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<title>Federal Register, Volume 87 Issue 115 (Wednesday, June 15, 2022)</title>
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[Federal Register Volume 87, Number 115 (Wednesday, June 15, 2022)]
[Notices]
[Pages 36104-36107]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2022-12826]
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DEPARTMENT OF COMMERCE
Bureau of Industry and Security
Quicksilver Manufacturing, Inc., 8209 Market St. #A173,
Wilmington, NC 28411; Rapid Cut LLC, 8209 Market St. #A173, Wilmington,
NC 28411; U.S. Prototype, Inc., 8209 Market St. #A173, Wilmington, NC
28411; Order Temporarily Denying Export Privileges
Pursuant to Section 766.24 of the Export Administration Regulations
(the ``Regulations'' or ``EAR''),\1\ the Bureau of Industry and
Security (``BIS''), U.S. Department of Commerce, through its Office of
Export Enforcement (``OEE''), has requested the issuance of an Order
temporarily denying, for a period of 180 days, the export privileges
under the Regulations of: Quicksilver Manufacturing, Inc.
(``Quicksilver''), Rapid Cut LLC (``Rapid Cut''), and U.S. Prototype,
Inc. (U.S. Prototype).
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\1\ On August 13, 2018, the President signed into law the John
S. McCain National Defense Authorization Act for Fiscal Year 2019,
which includes the Export Control Reform Act of 2018, 50 U.S.C.
4801-4852 (``ECRA''). While Section 1766 of ECRA repeals the
provisions of the Export Administration Act, 50 U.S.C. App. 2401 et
seq. (``EAA''), (except for three sections which are inapplicable
here), Section 1768 of ECRA provides, in pertinent part, that all
orders, rules, regulations, and other forms of administrative action
that were made or issued under the EAA, including as continued in
effect pursuant to the International Emergency Economic Powers Act,
50 U.S.C. 1701 et seq. (``IEEPA''), and were in effect as of ECRA's
date of enactment (August 13, 2018), shall continue in effect
according to their terms until modified, superseded, set aside, or
revoked through action undertaken pursuant to the authority provided
under ECRA. Moreover, Section 1761(a)(5) of ECRA authorizes the
issuance of temporary denial orders. 50 U.S.C. 4820(a)(5).
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OEE's request and related information indicates that these three
parties use the same rental mailbox located in Wilmington, NC, which
was opened by Quicksilver's Vice President of Operations who was
involved in some of the conduct described infra. Additionally, the
investigation reveals that another Quicksilver officer is listed as the
president and registered agent for US Prototype and the designated
representative for Rapid Cut's corporate banking account.
I. Legal Standard
Pursuant to Section 766.24, BIS may issue an order temporarily
denying a respondent's export privileges upon a showing that the order
is necessary in the public interest to prevent an ``imminent
violation'' of the Regulations. 15 CFR 766.24(b)(1) and 766.24(d). ``A
violation may be `imminent' either in time or degree of likelihood.''
15 CFR 766.24(b)(3). BIS may show ``either that a violation is about to
occur, or that the general circumstances of the matter under
investigation or case under criminal or administrative charges
demonstrate a likelihood of future violations.'' Id. As to the
likelihood of future violations, BIS may show that the violation under
investigation or charge ``is significant, deliberate, covert and/or
likely to occur again, rather than technical or negligent[.]'' Id. A
``[l]ack of information establishing the precise time a violation may
occur does not preclude a finding that a violation is imminent, so long
as there is sufficient reason to believe the likelihood of a
violation.'' Id.
Pursuant to Sections 766.23 and 766.24, a temporary denial order
[[Page 36105]]
(``TDO'') may also be made applicable to other persons if BIS has
reason to believe that they are related to a respondent and that
applying the order to them is necessary to prevent its evasion. 15 CFR
766.23(a)-(b) and 766.24(c). A ``related person'' is a person, either
at the time the TDO's issuance or thereafter, who is related to a
respondent ``by ownership, control, position of responsibility,
affiliation, or other connection in the conduct of trade or business.''
15 CFR 766.23(a). Related persons may be added to a TDO on an ex-parte
basis in accordance with Section 766.23(b) of the Regulations. 15 CFR
766.23(b).
II. OEE'S Request for a Temporary Denial Order
As further detailed below, OEE's request is based upon facts
indicating that Respondents engaged in conduct prohibited by the
Regulations by exporting or causing the export from the United States
of controlled technology to China for 3D printing without the required
U.S. government authorization. ``Export'' is defined in the EAR as an
``actual shipment or transmission out of the United States, including
the sending or taking of an item out of the United States, in any
manner.'' 15 CFR 734.13(a)(1).\2\
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\2\ ``Item'' means ``commodities, software, and technology. 15
CFR 772.1. Further, ``technology'' may be in any tangible or
intangible form, such as written or oral communications, blueprints,
drawings, photographs, plans, diagrams, models, formulae, tables,
engineering designs and specifications, computer-aided design files,
manuals or documentation, electronic media or information revealed
through visual inspection. Id.
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A. Unlicensed Export of National Security Controlled Technology to
China
In or about February 2020, OEE was alerted by a U.S. aerospace and
global defense technology company, on behalf of its wholly-owned
subsidiary, (collectively ``U.S. Company 1''), of an export-control
violation committed by a third-party supplier involving the
unauthorized export of controlled satellite technology to the People's
Republic of China (``China''). OEE's investigation revealed that in or
about July 2017, satellite parts were ordered from Quicksilver in
Wilmington, North Carolina. Quicksilver markets itself as a company
that specializes in fabrication and metalworking, including 3D-
printing, injection molding, and laser-cut sheet metal prototypes,
among other manufacturing services.
As part of the transaction, Quicksilver was provided approximately
a dozen technical drawings and 3D graphic/computer aided drawing files,
items subject to the Regulations, intended to be used by Quicksilver to
manufacture the components to the identified specifications. The
components would then be provided to U.S. Company 1 for use in a
prototype space-satellite.
On or about July 6, 2017, a Quicksilver employee using <a href="/cdn-cgi/l/email-protection#33525d7342465a5058405a5f4556411e0f52135b4156550e" http: mfg.com">mfg.com</a>">an@quicksilver-<a href="http://mfg.com">mfg.com</a></a> email address signed a Mutual Non-Disclosure
Agreement (``NDA''). The NDA contains, in part, the following language
related to United State export laws and regulations:
EXPORT CONTROL. The Parties acknowledge that the Proprietary
Information and any related materials or information provided under
this Agreement may be subject to United States export laws and
regulations, including but not limited to the International Traffic
in Arms Regulations and the Export Administration Regulations. The
Parties agree that all activities under this Agreement will be
conducted in strict compliance with the United States export laws
and regulations. The Receiving Party shall not distribute, transfer,
or transmit any Proprietary Information and related materials or
information (even if incorporated into other products) except in
compliance with the United States export laws and regulations. The
Receiving Party shall first obtain the written consent of the
Disclosing Party prior to submitting any request to any governmental
entity for authority to export any Proprietary Information and
related materials or information or conducting any export or
reexport of information or services pursuant to the United States
export laws and regulations.
On or about July 11, 2017, Quicksilver's Vice President of
Operations using <a href="/cdn-cgi/l/email-protection#04656a4475716d676f776d68726176293865246c76616239" http: mfg.com">mfg.com</a>">an@quicksilver-<a href="http://mfg.com">mfg.com</a></a> email address was asked to
``please quote price and delivery'' for several specified drawings.
Technical drawings, item subject to the Regulations, classified under
Export Control Classification Number 9E515, and controlled for National
Security reasons were attached to the email.\3\ These items were
subject to a presumption of denial licensing policy for China.\4\
Approximately three days later, Quicksilver was provided purchase
orders containing the following language regarding export requirements:
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\3\ ECCN 9E515 covers ``[t]echnology required for the
``development'', ``production'', operation, installation, repair,
overhaul, or refurbishing of spacecraft and related commodities.''
\4\ 15 CFR 742.4.
The Seller shall comply with all applicable U.S. export control
laws in receiving, utilizing and/or disposing of any articles,
technical data and/or services provided by the Buyer in connection
with this order, and in transferring or otherwise disposing of any
articles, technical data and/or services developed or produced
therefrom by the Seller. As provided in the Terms and Conditions for
this order, no technical data or other items provided by the Buyer
or developed or produced by the Seller may be exported, transferred,
or disclosed outside the United States or to any foreign person,
unless the Buyer provides written consent and the Seller obtains all
required export licenses and/or other approvals from the United
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States Government.
Quicksilver fulfilled the order, which was received by U.S. Company 1
in or around August 2017. The shipping label and the pro forma invoice
provided within the shipment identified Quicksilver as having an
address in China and indicated that the products had been shipped from
China. No export license had been sought or obtained for this
transaction.
More recently, in or about July 2021, OEE discovered a violation by
Rapid Cut which, as discussed above, is related to Quicksilver by
location, ownership and operating personnel, also involving controlled
technology exported to China without the required BIS export license.
In particular, in or about May 2021, U.S. Company 2 hired Rapid Cut to
manufacture specially designed parts intended for a rocket platform's
ground support and test equipment. According to U.S. Company 2, the
technology provided to Rapid Cut is classified under ECCN 9E604.a,\5\
controlled for National Security and Missile Technology reason, and has
a presumption of denial licensing policy for China. The technology was
subsequently transferred on or about May 7, 2021, to China without
requires export licenses. Moreover, the on-going investigation revealed
that U.S. Company 2 provided Rapid Cut a copy of its standard terms and
conditions, which included the need for compliance with all applicable
international trade control laws, and that each page of drawings was
marked with an Export Control Statement, which stated:
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\5\ ``Technology'' ``required'' for the ``development,''
``production,'' operation, installation, maintenance, repair,
overhaul, or refurbishing of commodities controlled by ECCN 9A604
[commodities related to launch vehicles, missiles, and rockets] or
9B604, or ``software'' controlled by ECCN 9D604.
``THIS DOCUMEN CONTAINS U.S. EXPORT CONTROLLED INFORMATION (ITAR
OR EAR). THE EXPORT, RE-EXPORT, TRANSFER OR RE-TRANSFER OF THIS
DOCUMENT TO ANY OTHER COMPANY, ENTITY, PERONS OR DESTINATION, OR FOR
ANY USE OR PURPOSE OTHER THAN FOR WHICH THE DOCUMENT WAS PROVIDED BY
[U.S. Company 2] IS PROHIBITED WITHOUT APPROVAL FROM [U.S. Company
2] AND AUTHORIZATION UNDER APPLICABLE EXPORT CONTROL LAWS. THIS
DOCUMENT IS
[[Page 36106]]
CONFIDENTIAL AND PROPRIETARY TO [U.S. Company 2].''
B. Unlawful Export to China of Controlled Technical Data Subject to the
International Traffic in Arms Regulations
OEE's on-going investigation produced evidence that Respondents
clear disregard for export controls extends beyond just items subject
to the EAR but also encompasses the unlicensed export of defense
articles, designated in the ITAR and listed on the U.S. Munitions List,
to China.\6\ OEE's investigation identified communications between
Quicksilver and another one of its U.S. customers, an advanced science
and engineering company with multiple U.S. government contracts
including with various components of the Department of Defense (``U.S.
Company 3), which followed the same general factual pattern described
above. For example, Quicksilver signed a confidentiality agreement
dated February 12, 2019, with U.S. Company 3 agreeing that, among other
things, it would not export or reexport any confidential information
``to any country prohibited from obtaining such Confidential
Information, either directly or indirectly . . . which may be in
violation of United States and/or foreign export control laws.''
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\6\ 22 CFR 120.6.
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In addition, on or about March 17, 2020, in connection with a
different project, U.S. Company 3 sent Quicksilver technical drawings
and computer aided design files for 3D manufacture. Some of the drawing
and files contained the following export control markings:
EXPORT CONTROLLED--ITAR RESTRICTED: THIS DOCUMENT CONTAINS
TECHNICAL DATA WHOSE EXPORT IS RESTRICTED BY THE ARMS EXPORT CONTROL
ACT (TITLE 22, U.S.C., SEC 2751, ET SEQ.) OR THE EXPORT
ADMINISTRATION ACT OF 1979, AS AMENDED, TITLE 50 U.S.C., APP. 240 ET
SEQ. VIOLATIONS OF THESE EXPORT LAWS ARE SUBJECT TO SEVERE CRIMINAL
PENALTIES. DISSEMINATE IN ACCORDANCE WITH PROVISIONS OF DOD
DIRECTIVE 5230.25.
A subsequent purchase order sent from U.S. Company 3 to Quicksilver
for its signature further stated in part:
I reviewed the General Terms and Conditions on [U.S. Company
3's] website and noted a section pertaining to compliance with all
applicable U.S. export control laws and regulations, specifically
including but not limited to the Arms Export Control Act, ITAR, and
the EAR.
On or about April 16, 2020, U.S. Company 3 received an invoice for the
controlled items from Quicksilver which identified the shipper/exporter
as Quicksilver MFG in Zhongshan, China. The investigation determined
that technical drawings sent to China were defense articles controlled
under USML Category XX (Submersible Vessels and Related Articles),
section (d), and therefore, U.S. Government authorization was required
to export the technical drawings to China. No such authorization was
sought or received.
C. U.S. Prototype as a Related Person to Both Quicksilver and Rapid Cut
OEE's investigation has established that U.S. Prototype uses the
same Wilmington, NC mailbox address as both Quicksilver and Rapid Cut.
Additionally, publicly available documents with the North Carolina
Secretary of State's office show that U.S. Prototype's president and
registered agent is a Quicksilver officer who was involved in the
transactions described above and whose wife is also listed as U.S.
Prototype's vice president. Moreover, that same Quicksilver officer is
listed as the designated representative for Rapid Cut's corporate bank
account. U.S. Prototype's corporate banking account also identifies
itself as U.S. Prototype, Inc., DBA [doing business as] Rapid Cut.
III. Findings
I find that the evidence presented by BIS demonstrates that a
violation of the Regulations by the above-captioned parties is imminent
in degree of likelihood. As such, a TDO is needed to give notice to
persons and companies in the United States and abroad that they should
cease dealing with Quicksilver, Rapid Cut, and U.S. Prototype in export
or reexport transactions involving items, including technology or
software, subject to the EAR. Such a TDO is consistent with the public
interest to preclude future violations of the Regulations given the
serious national security concerns impacted by the misconduct and the
clear disregard for complying with U.S. export control laws.
This Order is being issued on an ex parte basis without a hearing
based upon BIS's showing of an imminent violation in accordance with
Section 766.24 of the Regulations.
It is therefore ordered:
First, that Quicksilver Manufacturing, Inc., with an address at
8209 Market St. #A173, Wilmington, NC 28411; Rapid Cut LLC, with an
address at 8209 Market St. #A173, Wilmington, NC 28411; and U.S.
Prototype, Inc., with an address at 8209 Market St. #A173, Wilmington,
NC 28411, and when acting for or on their behalf, any successors or
assigns, agents, or employees (each a ``Denied Person'' and
collectively the ``Denied Persons'') may not, directly or indirectly,
participate in any way in any transaction involving any commodity,
software or technology (hereinafter collectively referred to as
``item'') exported or to be exported from the United States that is
subject to the EAR, or in any other activity subject to the EAR
including, but not limited to:
A. Applying for, obtaining, or using any license, License
Exception, or export control document;
B. Carrying on negotiations concerning, or ordering, buying,
receiving, using, selling, delivering, storing, disposing of,
forwarding, transporting, financing, or otherwise servicing in any way,
any transaction involving any item exported or to be exported from the
United States that is subject to the EAR, or in any other activity
subject to the EAR; or
C. Benefitting in any way from any transaction involving any item
exported or to be exported from the United States that is subject to
the EAR, or in any other activity subject to the EAR.
Second, that no person may, directly or indirectly, do any of the
following:
A. Export, reexport, or transfer (in-country) to or on behalf of a
Denied Person any item subject to the EAR;
B. Take any action that facilitates the acquisition or attempted
acquisition by a Denied Person of the ownership, possession, or control
of any item subject to the EAR that has been or will be exported from
the United States, including financing or other support activities
related to a transaction whereby a Denied Person acquires or attempts
to acquire such ownership, possession or control;
C. Take any action to acquire from or to facilitate the acquisition
or attempted acquisition from a Denied Person of any item subject to
the EAR that has been exported from the United States;
D. Obtain from a Denied Person in the United States any item
subject to the EAR with knowledge or reason to know that the item will
be, or is intended to be, exported from the United States; or
E. Engage in any transaction to service any item subject to the EAR
that has been or will be exported from the United States and which is
owned, possessed or controlled by a Denied Person, or service any item,
of whatever origin, that is owned, possessed or controlled by a Denied
Person if such service involves the use of any item subject to the EAR
that has been or will be exported from the United States. For purposes
of this paragraph, servicing
[[Page 36107]]
means installation, maintenance, repair, modification, or testing.
Third, that, after notice and opportunity for response as provided
in section 766.23 of the EAR, any other person, firm, corporation, or
business organization related to Quicksilver Manufacturing or Rapid
Cut, by affiliation, ownership, control, or position of responsibility
in the conduct of trade or related services may also be made subject to
the provisions of this Order.
In accordance with the provisions of Section 766.24(e) of the EAR,
Quicksilver Manufacturing or Rapid Cut, may, at any time, appeal this
Order by filing a full written statement in support of the appeal with
the Office of the Administrative Law Judge, U.S. Coast Guard ALJ
Docketing Center, 40 South Gay Street, Baltimore, Maryland 21202-4022.
In accordance with the provisions of Sections 766.23(c)(2) and
766.24(e)(3) of the EAR, U.S. Prototype may, at any time, appeal its
inclusion as a related person by filing a full written statement in
support of the appeal with the Office of the Administrative Law Judge,
U.S. Coast Guard ALJ Docketing Center, 40 South Gay Street, Baltimore,
Maryland 21202-4022.
In accordance with the provisions of Section 766.24(d) of the EAR,
BIS may seek renewal of this Order by filing a written request not
later than 20 days before the expiration date. Respondents Quicksilver
Manufacturing, Rapid Cut, or U.S. Prototype, Inc., may oppose a request
to renew this Order by filing a written submission with the Assistant
Secretary for Export Enforcement, which must be received not later than
seven days before the expiration date of the Order.
A copy of this Order shall be served on each denied person and
shall be published in the Federal Register.
This Order is effective immediately and shall remain in effect for
180 days.
This document of the Bureau of Industry and Security was signed on
June 7, 2022. That document with the original signature and date is
maintained by the Bureau of Industry and Security. This duplicate
original document was re-signed for administrative purposes only, and
in compliance with publication requirements of the Office of the
Federal Register. This administrative process in no way alters the
legal effect of this document upon publication in the Federal Register
or of the original June 7 document.
Dated: June 7, 2022.
Matthew S. Axelrod,
Assistant Secretary for Export Enforcement.
[FR Doc. 2022-12826 Filed 6-14-22; 8:45 am]
BILLING CODE 3510-DT-P
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