On June 30th, the Bureau of Industry and Security (BIS) announced four policy changes that are intended to strengthen BIS’s enforcement tools for matters involving export violations. For people whose business relies on exports, this puts a spotlight on the importance of export compliance programs.
The export enforcement program changes were detailed in a memorandum from Assistant Secretary of
Commerce for Export Enforcement, Matthew S. Axelrod. They were effective immediately upon publication.
- Penalties are Increasing: New guidance on aggravating and mitigating factors is now in place, and BIS intends to aggressively apply these new BIS guidelines (see 15 C.F.R. Part 766 Supplement 1). This may include a more aggressive view of which cases are deemed “egregious” and therefore warrant higher penalties. Assistance Secretary Axelrod explained, “[b]y imposing stiff penalties, we aim to achieve three things: (1) reaching resolutions that adequately reflect the national security harm caused by violations; (2) creating a strong disincentive for those considering circumvention; and (3) maintaining a level playing field for those that invest in a strong compliance program.”
- Administrative Disposition for Existing Less-Serious Cases: This new policy applies to pending cases that (1) are not egregious, (2) have not resulted in serious national security harm, but (3) rise above the threshold for a warning letter. BIS is permitted to settle these for non-monetary penalties and rely on a suspended denial order combined with corrective-action-conditions (which could include training, development of a compliance program, etc.). This permits BIS to get some of these pending cases off of its docket so that it can focus its enforcement resources on the more egregious cases, but the new policy will require a bit of negotiation in order to arrive at the appropriate corrective-action-conditions.
- Elimination of “No Admit, No Deny” Settlements: These were settlements in which no admission of conduct was necessary. Going forward, BIS will require parties to admit to their conduct as part of a settlement.
- The policy reasons for this is because BIS wants others to be able to look at the settlement agreements to discern the conduct that is unacceptable (major settlements are often announced by BIS).
- Related to this, in a recent speech, Assistant Secretary Axelrod also announced that BIS is considering making charging letters available when the charges are brought, instead of waiting until the cases are over to publicize them.
- Dual-Track Processing of Voluntary Self-Disclosures: BIS is changing the way that it handles Voluntary Self-Disclosures (VSDs).
- For minor and technical infractions, BIS will “fast-track” these and resolve them within 60 days of the final VSD submission. In our experience, these matters are typically resolved with a warning letter or a no-action letter.
- For more serious violations, an agency attorney will be assigned to follow-up to get more information and to make appropriate decisions concerning the VSD.
In summary, the changes are designed to more quickly process the less serious matters, so that enforcement resources can be focused on the more serious cases. As BIS is able to focus its enforcement resources on more serious cases, we can expect BIS to seek civil penalties that are higher than they have been in the past.
While every case is unique, we often recommend that our firm’s aviation clients file Voluntary Self-Disclosures (VSDs) when they suspect a non-compliance with the export laws. We have had a lot of good experiences working with the government as a partner in compliance through the VSD process. The VSD process includes a lot of technical details so it is important to read the regulations and also seek competent legal support for your VSD, to make sure that you are eligible for the benefits of the BIS’ VSD program. The new policies concerning corrective-action-conditions should be quite familiar to aviation industry businesses, because they are the sorts of things that we already recommend to the aviation industry in order to foster future compliance. Things like training and compliance programs can reflect a good way to help prevent the sort of non-compliances that necessitate VSDs.