In one of the first enforcement actions of 2025, the U.S. Department of Commerce’s Bureau of Industry and Security (“BIS”) issued a final order against Haas Automation, Inc., a leading manufacturer of computer numerical control (“CNC”) machines, for dozens of violations of the Export Administration Regulations (“EAR”). The enforcement action stems from allegations that Haas facilitated the unauthorized export, reexport, or transfer of U.S.-origin machine tool parts to parties designated on the BIS Entity List in China and Russia over a period spanning from April 2019 through March 2024.

According to the order, Haas committed forty-one (41) violations of Section 764.2(b) of the EAR by aiding in the export of parts subject to the regulations to six (6) Entity List parties in China and two in Russia. The parts, valued collectively at approximately $29,254, were used to service CNC machines previously sold to these parties. The Entity List—set forth in Supplement No. 4 to Part 744 of the EAR—identifies entities subject to additional licensing requirements due to their involvement in activities contrary to U.S. national security and foreign policy interests. Despite these restrictions, Haas continued to supply its authorized distributors with parts intended for these restricted customers without obtaining the requisite export licenses from BIS.

BIS’s investigation revealed that Haas sold machine parts such as gearboxes, magnetic encoder adapters, and dual battery replacement kits—classified under the EAR99 designation—to these restricted entities. The sales to China occurred between April 2019 and March 2024, while the sales to Russia took place between January 2020 and November 2021. Haas’s distributors facilitated the transactions, and the parts were used to maintain high-value CNC machines in critical industries such as aerospace, defense, and electronics manufacturing.

In addition to the forty-one (41) aiding and abetting violations, the order details a separate violation under Section 764.2(a) of the EAR related to inaccurate and incomplete Electronic Export Information (“EEI”) filings. From November 2021 through May 2022, Haas’s authorized distributor in Russia, through its freight forwarder, submitted erroneous EEI filings that failed to accurately reflect the nature of the exported items and their intended end users. The inaccurate filings occurred after comprehensive export controls were imposed on Russia in response to geopolitical developments in early 2022. The investigation revealed that Haas did not obtain written assurances from the distributor affirming their responsibility for compliance, thereby retaining ultimate liability for the accuracy of the submitted export documentation.

Concurrent with the BIS action, which resulted in a civil penalty of $1,500,000, the U.S. Department of the Treasury’s Office of Foreign Assets Control (“OFAC”) reached a settlement with Haas Automation for $1,044,781 to resolve twenty-one (21) apparent violations of the Ukraine-/Russia-Related Sanctions Regulations (“URSR”). OFAC’s investigation revealed that between December 2019 and March 2022, Haas indirectly exported one (1) CNC machine, thirteen (13) spare parts orders, and seven (7) financial unlock codes to blocked Russian entities. These entities, including several on the Specially Designated Nationals and Blocked Persons (“SDN”) List, were identified as operating in critical sectors of the Russian Federation’s defense and energy industries. OFAC determined that eight (8) of the twenty-one (21) violations were egregious due to their impact on U.S. foreign policy objectives, including efforts to degrade Russia’s military capabilities during its ongoing conflict with Ukraine.

Haas’s distributor-based sales model contributed to the violations, as its Russian distributor, Abamet Management Limited, facilitated the indirect export of U.S.-origin goods to these restricted entities. The violations involved both direct sales and the provision of unlock codes necessary for the continued operation of CNC machines. OFAC’s findings emphasized Haas’s insufficient due diligence regarding ownership structures of its customers and its failure to rescreen entities against the SDN List for ongoing transactions. This lack of compliance measures enabled restricted entities to access and utilize U.S.-origin goods and services over a multi-year period.

Under the terms of the OFAC settlement, Haas’s penalties were significantly reduced from a potential maximum of over $7.7 million due to mitigating factors, including its substantial cooperation during the investigation and swift implementation of remedial measures. These measures included enhanced compliance policies, additional personnel hires, the introduction of new screening tools, and the termination of its relationship with Abamet in March 2022. OFAC’s analysis also highlighted the aggravating factors, including the severity of harm to U.S. foreign policy objectives and Haas’s failure to exercise due care in a high-risk regulatory environment.

As part of the combined enforcement actions, Haas is required to undertake two (2) independent audits of its export compliance program and to submit the results to BIS. These audits, alongside the company’s broader compliance enhancements, are intended to ensure ongoing adherence to U.S. export control and sanctions regulations. Both BIS and OFAC emphasized that these actions should serve as a cautionary tale for companies operating in high-risk jurisdictions or industries, underscoring the critical importance of robust compliance frameworks, due diligence, and ongoing monitoring.

The enforcement actions against Haas Automation highlight the interconnected nature of U.S. export control and sanctions regimes. Companies engaged in international trade must maintain rigorous compliance programs capable of addressing both regulatory frameworks. The Haas case underscores the severe consequences of lapses in compliance, particularly in high-stakes industries where the risks to national security and foreign policy objectives are heightened. By prioritizing proactive compliance measures, companies can mitigate enforcement risks and support broader efforts to uphold U.S. regulatory standards and foreign policy interests.