[Federal Register Volume 87, Number 115 (Wednesday, June 15, 2022)]
[Notices]
[Pages 36104-36107]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[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according to their terms until modified, superseded, set aside, or 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 mfg.com">an@quicksilver-mfg.com 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 mfg.com">an@quicksilver-mfg.com 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